Headline News Today

On appeal from: [2020] EWCA Civ 387

This appeal concerns the proper basis for awarding remedies in cases of proprietary estoppel. Proprietary estoppel arises when a person gives a promise or assurance to another person that they have or will be given an interest in property and that other person reasonably relies on the promise or assurance to their detriment.

The case arises from a dispute between members of a farming family over the future of the family farm. The Claimant is the eldest child of the Defendants who presently own the farm. The Defendants have another son (‘R), who is also a farmer, and a daughter (‘J’), who is not. The Claimant lived and worked on the farm with his parents for some 32 years after leaving school in 1982, with increasing responsibilities. The Claimant was paid for his work but at relatively low rates.

The Claimant had been promised by his parents that he would inherit a substantial but unspecified share of the farm, sufficient to enable him to continue a viable farming business after the father’s death. In fact, his parents had made wills in 1981 providing for him and R to inherit the farm in equal shares subject to financial provision of 20 percent of the estate for J.

However, from around 2008, the relationship between the Claimant and his parents began to deteriorate. In May 2014 the parents made new wills removing the Claimant’s inheritance. In April 2015 they dissolved their farming partnership with the Claimant and gave him notice to quit the property on the farm in which he and his family lived.

The Claimant issued proceedings alleging that he was entitled to a share in the farm or its monetary equivalent on the grounds of proprietary estoppel. The trial judge held that the Claimant had continued to work on the farm for little financial reward because he reasonably relied, to his detriment, on various assurances made by his parents as to his future inheritance of the farm. He thereby satisfied the conditions for the estoppel to arise.

The trial judge ordered the Defendants to make an immediate payment of £1.3 million (subject to certain adjustments) to the Claimant to satisfy his expectation as to what he would have inherited. This was calculated as 50 percent of the value of the dairy farming business plus 40 percent of the value of the freehold land and buildings at the farm.

Before the Court of Appeal, the Defendants argued that the trial judge had been wrong to fashion the remedy based on the Claimant’s expected inheritance. They argued that the award should instead have been calculated by reference to the Claimant’s contribution to the value of the farm or his loss of opportunity to work elsewhere. They also argued that the remedy wrongly accelerated the Claimant’s expectation, as he had not expected to receive an interest in the farm until his parents’ death. The Court of Appeal dismissed the appeal holding that it was appropriate to order a remedy by reference to the Claimant’s expectation and that the trial judge was entitled to make the order he did. The defendants appealed to the Supreme Court.

 

HELD: The Supreme Court allows the appeal in part and substitutes alternate remedies of either putting the farm into trust in favour of their children or paying compensation to the Claimant now but with a reduction properly to reflect his earlier-than-anticipated receipt. The Defendants are to be entitled to choose between these options.

 

Reasons for the Judgment

Lord Briggs identifies the purpose of proprietary estoppel as being to prevent or compensate for the unconscionability of a person going back on a promise upon which another person has relied to their detriment.

Following an analysis of previous case law, Lord Briggs concludes that historically the usual remedy was to enforce the promise, as the simplest way to remedy the unconscionability. However, when the circumstances made strict enforcement unjust the court could substitute a payment based upon (but sometimes less than) the value that the promisee expected to receive.

Lord Briggs rejects the idea that the aim of a remedy for proprietary estoppel ever has been (or should be) based on compensating for the detriment suffered by the promisee. The remedy should not be out of all proportion to the detriment suffered without good reason, but this only serves as a useful cross-check for potential injustice.

Lord Briggs considers that the court should start by determining whether going back on the promise is unconscionable at all in the circumstances. If it is, then the court should then proceed on the assumption that the simplest way to remedy that unconscionability is to enforce the promise to transfer the property in question, but it may have to consider alternatives such as providing a monetary equivalent, for example if the property has been sold or if its transfer would cause injustice to others. If the enforcement of the promise, or monetary equivalent, would be out of all proportion to the detriment to the promisee, then the court may need to limit the remedy. However, this does not mean it should seek precisely to compensate for the detriment to the promisee. If the remedy involves acceleration of a future promised benefit, it will generally require a discount for accelerated receipt. Finally, the court should consider in the round whether a particular remedy would do justice in the circumstances, by considering whether the promisor would be acting unconscionably if they were to confer the proposed benefit on the promisee.

Applying these principles Lord Briggs rejects the parents’ argument that the trial judge was wrong to adopt an approach based on the Claimant’s expected inheritance. However, he holds that the trial judge did not adequately discount the sum awarded to reflect the fact that the Claimant would receive compensation earlier than he had expected to inherit an interest in the farm.

Considering the remedy afresh Lord Briggs holds that the parents should be entitled to choose between putting the farm into trust for the children subject to a life interest in the defendant’s favour; or making an immediate payment of compensation on the lines the judge ordered but with sufficient discount to reflect the early receipt. If the amount of such payment cannot be agreed following valuation of the farm it will be remitted to the Chancery Division to determine the amount.

Lord Leggatt disagrees with Lord Briggs and considers that the core principle underpinning relief for proprietary estoppel is to prevent a party going back on a promise without ensuring that the party who relied on that promise will not suffer a detriment as a result of that reliance. To achieve this a court may either: (1) compel performance of the promise (or order equivalent payment to put the promisee in the position they would have been if the promised had been performed); or (2) award compensation to put the promisee into as good a position as if they had not relied on the promise. The court should adopt whichever method results in the minimum award necessary to meet the aim. On this basis Lord Leggatt would have awarded Andrew £610,000 to compensate for the detriment he has suffered as a result of working on the farm in reliance upon his parents’ assurances. This reflects the estimated additional amount the Claimant would have earned by working elsewhere [Appendix].

 

See here for the Judgment (PDF)

See here for the Press summary (HTML version)

Watch hearing

15 July 2021                Morning session         Afternoon session

In this post, Grant Arnold, a paralegal in the litigation team at CMS, previews the decision awaited from the Supreme Court in Unger and Anor (in substitution for Hasan) v Ul-Hasan (deceased) and Anor.

Factual Background

Ms Hasan and Mr Ul-Hasan married in Pakistan in 1981. The parties separated in 2006, before the husband obtained a divorce in Pakistan in 2012. Over the course of the marriage, Ms Hasan contends that the couple accumulated significant wealth.

In August 2017, Ms Hasan was given leave to bring proceedings for financial provision under the Matrimonial and Family Proceedings Act 1984, Pt III (“Pt III”) providing that, in certain circumstances, an English court can grant financial provision for a spouse following an overseas divorce. However, in January 2021, Mr Ul-Hasan died before Ms Hasan’s application could be decided. The decisive question for the court therefore centred on whether Ms Hasan’s unadjudicated claim under Pt III survived her husband’s death and could be continued against his estate.

The Decision of the High Court

Ms Hasan’s argument was that she was not bound by the authorities under the Matrimonial Causes Act 1973, Pt II (“Pt II”), nor those under the Inheritance (Provision for Family and Dependants) Act 1975, which hold that financial claims made during marriage or following divorce expire if either party has died before adjudication. As these authorities deal with domestic divorces relating to different statutes, Ms Hasan contended that the court was free to adopt a different approach under Pt III, for which the question had never previously been considered. It was, she claimed, a “blank canvas” for Mostyn J to decide.

On 2 July 2021, Mostyn J dismissed the application. It was observed that “Section 17 of the 1984 Act imports all the powers under ss.23 and 24 of the 1973 Act”, and further, that “Section 18(3) requires the court to exercise those powers in accordance with the terms of s.25 of the 1973 Act.” As such, the jurisprudence was held to be equally applicable as between claims made under Pt II, following a domestic divorce, and those under Pt III, following an overseas divorce, and to suggest otherwise, Mostyn J notes, would be the “height of artifice”.

With respect to the relevant authorities, Mostyn J acknowledged that the court was bound by the Court of Appeal decision in Sugden v Sugden [1957] P 120, whereby it was held that claims for ancillary relief were only enforceable post-death in circumstances where an effective order was already issued.

However, although Mostyn J was bound, he firmly disagreed with Sugden and set out his reasoning on three principal fronts:    

Based on a proper interpretation of the Law Reform (Miscellaneous Provisions) Act 1934, s1(1) claims for ancillary relief should be recognised as “causes of action” capable of subsisting post-death;
If the law permits certain types of claims to subsist post-death, such as civil claims in contract and tort, it is unclear why claims for ancillary relief are prohibited given that they are often more concrete and less speculative in nature;
The inconsistent approach between unadjudicated cases, and those in which the appeal courts’ exercise their discretion to either affirm, set-aside, or vary financial remedy orders where the party has died shortly after they’ve made the order.

On those bases, Mostyn J permitted either party to make a leapfrog application for leave to appeal to the Supreme Court pursuant to the Administration of Justice Act 1969, s.12(1).

Comment

It is now for the Supreme Court to decide whether they are persuaded by Mostyn J’s judgment. If in agreement, this would have a significant impact on the scope of divorce litigation where a party dies whilst proceedings are ongoing. Arguably, this opens the door to a financial claim being brought against an ex-spouse’s estate under the Matrimonial Causes Act 1973, rather than the potentially narrower route under the Inheritance Act 1975. As a matter of general public importance, it will be interesting to see what the Supreme Court decides.

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

On Tuesday 18th October the Court will hear an Assessment of Costs hearing in A Local Authority v JB. The hearing will be at 10:30 in Courtroom One, and will continue on Wednesday from 10:30. The Court will also hear McCue (as guardian for Andrew McCue) (AP) v Glasgow City Council, on appeal from [2020] CSIH 51. The Court will consider whether the Respondent’s charging policy for community care services is discriminatory. This hearing will take place at 10:30 in Courtroom Two.

On Wednesday 19th October, the Supreme Court will hand-down two judgments:

i. Guest and another v Guest [2022] UKSC 27 – on appeal from [2020] EWCA Civ 387

The appeal raises questions about the proper approach to granting relief under the doctrine of proprietary estoppel. The Supreme Court is asked to decide: (1) Whether a successful claimant’s expectation, in this case of inheritance of a family farm, was an appropriate starting point when considering a remedy; and (2) Whether the remedy granted, namely payment of a lump sum which would in effect result in the sale of the farm, went beyond what was necessary in the circumstances.

ii. Commissioners for His Majesty’s Revenue and Customs v NHS Lothian Health Board [2022] UKSC 28 – on appeal from [2020] CSIH 14

The Judgment will consider what is the correct approach that should be taken by the courts and tribunals to evidence and the burden and standard of proof in historical claims for the recovery of overpaid Value Added Tax.

On Thursday 20th October, the Court will hear Unger and another (in substitution for Hasan) v Ul-Hasan (deceased) and another, on appeal from [2021] EWHC 1791. The Court will consider whether an unadjudicated claim for financial provision under the Matrimonial and Family Proceedings Act 1984 survives the death of the respondent and can be continued against their estate. This hearing will take place at 10:30 in Courtroom One.

 

The following Supreme Court judgments remain outstanding: (As of 21/10/22)

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
Commissioners for Her Majesty’s Revenue and Customs v NCL Investments Ltd and another, heard 25th January 2022
Canada Square Operations Ltd v Potter, heard 14th June 2022
R v Andrewes, heard 21st June 2022
Hillside Parks Ltd v Snowdonia National Park Authority, heard 4th July 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 (as guardian for Andrew McCue) (AP) 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

 

The second day of the Supreme Court hearing in the matter of a reference by the Lord Advocate of devolution issues under s.34 of Schedule 6 (the “Reference”) to the Scotland Act 1998 (the “Act”) took place on Wednesday. CMS Associates James Warshaw and Francesca Knight heard arguments from within the Supreme Court.

Day 2 of the hearing was just as busy as Day 1, with the media and the public keen to witness the close of this constitutionally significant hearing. Continuing on from the end of Day 1, the first part of Day 2 was taken up with the Advocate General’s submissions, made in opposition to the Reference by the Lord Advocate.

As it had been previously ordered that the issue of the court’s jurisdiction to hear the Reference should be rolled up with submissions on the substance of the Reference, the Advocate General (Sir James Eadie KC appearing) continued dealing with the jurisdiction issue before moving onto the substance.

Jurisdiction

The Advocate General submitted that the Reference was premature and as such the Court had no jurisdiction to hear it. He submitted further that the Court should decline to exercise its discretion in this regard.

Following on from submissions made the previous day concerning the use of s.33 of the Act (rather than s.34 of Schedule 6 in this case), the Advocate General spent some time looking at the legislative safeguards (such as in s.31 of the Act) which prevent the Scottish Parliament acting outside its competence.

The AG then proceeded to make a number of further points in relation to the jurisdiction issue. He addressed the issues that would arise if the Lord Advocate (or the other law officers) were to be allowed to make a Reference in respect of draft Bills, including the risk that references may be made in respect of policy ideas.

A running theme of the Advocate General’s submissions was that the Act was deliberately drafted in such a way as to ensure that only Bills which had been introduced to Parliament could be referred under Reference procedure.

Substance

The Advocate General then submitted that, even if the Court determined that it did have jurisdiction to hear the Reference, the answer to the Reference question should be ‘Yes’ i.e., that a referendum on Scottish independence relates to reserved matters and so is not within the legislative competence of the Scottish Parliament to legislate in this area. This was the case whether the referendum was legally binding/“self-executing” or advisory.

The Advocate General submitted that the draft bill clearly related to reserved matters, that being the Union of the Kingdoms of Scotland and England (under s.1(b) of Schedule 5 of the Act) and matters relating to the Parliament of the UK (under s.1(c) of Schedule 5). The fact that the referendum would not be ‘self-executing’ also did not mean it did not relate to the Union. The UK Parliament has deliberately reserved matters relating to the Union including questions about whether it should continue.

The Advocate General did not engage with SNP’s self-determination arguments as set out in their written pleadings.

Response

The Lord Advocate highlighted the constitutional importance of the Reference and criticised the Advocate General for belittling and undermining the importance of the issue. She said that the Reference “has been brought not because the issue is trivial or one that has been raised on a whim or willy-nilly. It is a matter of the utmost constitutional importance.” She submitted that the Reference had been brought responsibly, after detailed consideration, and at the request of the First Minister.

In response to the concerns regarding the potential opening of floodgates (ie the risk that policy ideas would be referred), the Lord Advocate highlighted that this is the first Reference in the history of devolution.

Judgment

Lord Reed commented that judgment would be delivered as soon as possible. However, as indicated on Day 1, the Court has more than 8,000 pages of written material to consider and it is likely to be some months before judgment is delivered.

On appeal from: [2020] CSIH 60

The claimant in this case is a VAT-registered business principally specialising in the sale of dispensed spectacles and laser eye surgery under the name Optical Express. VAT operates in large measure by self-assessment, with taxable persons submitting periodic self-assessment returns to His Majesty’s Revenue and Customs (“HMRC”). The claimant is a “partially exempt” person for VAT purposes, as it makes both supplies on which VAT is chargeable (such as the supply of frames and lenses) and supplies which are exempt from VAT (such as dispensing services). Where a taxable person makes both taxable and exempt supplies, section 19(4) of the Value Added Tax Act 1994 (“VATA”) provides that the consideration (which was, in DCM’s case, the price paid for its goods and services) should be apportioned between the taxable and exempt elements.

The first issue before the Supreme Court concerned an assessment issued to the claimant by the respondent on 20 October 2005 which was disputed in relation to under-declared output VAT (the VAT on DCM’s sales) for accounting periods from October 2002 to July 2003. When faced with an incomplete or incorrect VAT return, section 73 of VATA empowers HMRC to make an assessment of the VAT due not later than whichever is the later of (a) two years after the end of the accounting period; or (b) one year after evidence of facts comes to HMRC’s knowledge which is, in HMRC’s opinion, sufficient to justify making the assessment. DCM argued that HMRC knew that “something was wrong” with its apportionment method by January 2004 and, from then, had one year to make their assessment. This meant that they were out of time to do so for the relevant accounting periods by October 2005, making their purported assessment invalid (“time bar challenge”).

Where VAT is charged to a taxable person on goods and services that it purchases, it is possible for that person to reclaim it as input VAT by setting it off against its output VAT. Under section 25(3) of VATA, if there is no output VAT or the amount of input VAT exceeds its output VAT, then the amount of the excess must be paid to the taxable person by HMRC as a VAT credit. The second issue before the Supreme Court concerns disputed decisions by which HMRC reduced the VAT credits which DCM had submitted in its returns. DCM argued that HMRC did not have the power to make the relevant reductions as section 25(3) of VATA mandated HMRC to pay DCM the VAT credits which it claimed (“vires challenge”).

DCM was unsuccessful in both of its challenges before the First-Tier Tribunal, although the Upper Tribunal allowed the time bar challenge. The Inner House of the Court of Session allowed HMRC’s appeal on the time bar challenge and dismissed DCM’s appeal on the vires challenge.

 

HELD – Appeal unanimously dismissed. The Supreme Court dismissed DCM’s vires challenge as HMRC did have the power to make the relevant reductions.

Issue 1: The time bar challenge

It was common ground between the parties that “knowledge” in section 73 of VATA meant actual, rather than constructive, knowledge (constructive knowledge being knowledge which HMRC did not, in fact, have, but which they could have had if they had taken the necessary steps to acquire it).

The Supreme Court holds that, when considering section 73 of VATA, a court must first decide what were the facts which, in HMRC’s opinion, justified the making of the particular assessment and then determine when the last piece of evidence of those facts was communicated to HMRC. It is from this date that the period of one year begins to run. HMRC obtained the last pieces of evidence relevant to the assessment of October 2005 (including, for the first time, from DCM’s VAT account) on 31 August and 1 September 2005, before which time HMRC did not have evidence of facts sufficient to justify that assessment. It was then that the clock began to run. The Supreme Court therefore dismisses DCM’s time bar challenge as HMRC were not out of time to make that particular assessment.

 

Issue 2: The vires challenge

HMRC’s powers are set out in statute either expressly or by implication.

It was common ground that HMRC have both a power and a duty to conduct a reasonable and proportionate investigation into the validity of VAT credit claims. That being accepted, the Supreme Court finds that the question becomes whether HMRC have the power to give effect to the result of this verification process by refusing to pay a claim. There is no express power to refuse to pay a claim so any power to do so, if it exists, must arise by implication.

The Supreme Court finds that it is implicit in section 25(3) of VATA that the obligation on HMRC to pay a VAT credit arises only once it is established by the verification process that the VAT credit is due: the obligation to pay does not depend solely on the say-so of the taxable person. The existence of a power and duty to verify and, where justified, refuse to pay a claimed VAT credit is not inconsistent with the statutory provisions of VATA, and is implicit in HMRC’s duty to “be responsible for the collection and management of VAT,” as set out in paragraph 1 of Schedule 11 to VATA. The implied power is consistent with the purpose of ensuring that the taxable person pays the right amount of VAT or receives the right amount of VAT credit.

The implied power is also consistent with the principle of fiscal neutrality, which underpins VAT jurisprudence and tasks HMRC with verifying a taxable person’s claims and refusing to pay sums which are not due. It does not involve unjustified discrimination between payment traders and repayment traders.

 

See here for the Judgment (PDF)

See here for the Press summary (HTML version)

Watch hearing

8 Feb 2022           Morning session               Afternoon session

The first day of the Supreme Court hearing in the matter of a Reference by the Lord Advocate of devolution issues under paragraph 34 of Schedule 6 to the Scotland Act 1998 commenced yesterday, with five justices of the Supreme Court sitting. CMS Senior Associate, Zainab Hodgson, heard arguments yesterday from within the Supreme Court.

On arrival at the Supreme Court, it was apparent from the crowds and press gathered outside that the case is of significant public importance, not just to the Scottish electorate but to the people of the United Kingdom.  The court room was full.  Just before the hearing commenced, the room was humming with activity as people were ushered in and took their seats, while lawyers, the media and general members of the public discussed the proceedings ahead.

Lord Reed opened the hearing with an explanation that the first question for the Court’s consideration was on the issue of jurisdiction, specifically whether it had jurisdiction to hear and determine the Reference.  Lord Reed explained that it is only if the Lord Advocate succeeds on the jurisdictional issue that the Supreme Court will proceed to consider the second question, being whether the provision of the proposed Scottish Independence Referendum Bill that provides that the question to be asked in a reference would be “Should Scotland be an independent country?” relates to reserved matters. In particular, does it relate to: (i) the Union of the Kingdoms of Scotland and England; and/or (ii) the Parliament of the United Kingdom.

Despite the political context in which the Reference arose, the Supreme Court made clear that the question for its consideration was a legal question.  Lord Reed explained that in the usual way, and noting that approximately 8,000 pages of material had been submitted to the Court, it is likely to take some months before judgment is given.  The hearing was described by Lord Reed to be only the “tip of the iceberg”.

The Lord Advocate’s submissions

The Lord Advocate delivered her submissions, which followed the structure of her written case, which is available here. Beginning with the background to the Reference, the Lord Advocate remarked that this is a power that has not previously been exercised by the Lord Advocate. The Lord Advocate then addressed the issue of jurisdiction.  In the Lord Advocate’s view, the Supreme Court has jurisdiction, and it should answer the question referred to it. The Lord Advocate emphasised that the Supreme Court’s answer was necessary and in the public interest. The Lord Advocate then spent some time on the issue of legislative competence, addressing head on the contentions raised, and cases relied on, in the Advocate General’s submissions.

During the Lord Advocate’s submissions, there were various questions from the bench on matters including: (i) the application of the qualification in paragraph 34, Schedule 6 of the Scotland Act, (ii) whether a member’s bill could be challenged under paragraph 34, Schedule 6; as well as (iii) consideration of why paragraph 1(f) relates only to questions of reserved matters, and whether there is a basis for describing such matters as particularly fundamental.

The Advocate General’s submissions (partly heard)

Sir James Eadie KC appeared on behalf of the Advocate General, and his written case can be found here.  On the issues of jurisdiction and the Court’s discretion, the Advocate General’s arguments proceeded from the starting point that there is clear and consistent authority, including from the Supreme Court, that it is not appropriate for the court to deal with abstract and premature questions concerning a draft of a Bill which has yet to be introduced into and passed by the Scottish Parliament.  In response to Lord Stephens’ comments that the question before the Court is not entirely abstract and whether the Court could proceed on the basis that the Bill is going to be passed, the Advocate General contended that the mere fact that the Scottish government has a majority and that it has proposed legislation does not necessarily mean that the legislation will ultimately be passed.

Additionally, the Advocate General argued that the legislation sets out a carefully regulated and specific timetable and set of requirements before a reference can be made in respect of a Bill, which, it was argued, the Lord Advocate seeks to bypass.

The Advocate General will complete his submissions today. CMS will be live-blogging the oral arguments.

Today the UK Supreme Court will hear a second day of oral arguments in the Lord Advocate’s Reference in relation to the Scottish Independence Referendum Bill (the “Bill”).

Most of the day will be dedicated to the Advocate General’s submissions which will begin with his jurisdiction argument. As Lord Reed noted at the start of the court day yesterday, there are two questions for the Court to answer:

(1) “Does the Supreme Court have jurisdiction to determine the Lord Advocate’s reference? In any event, should the Court decline to determine the reference as a matter of its inherent discretion?” (the jurisdiction question) and

(2) Does the provision of the proposed Scottish Independence Referendum Bill that provides that the question to be asked in a referendum would be “Should Scotland be an independent country?” relate to reserved matters? In particular, does it relate to: (i) the Union of the Kingdoms of Scotland and England; and/or (ii) the Parliament of the United Kingdom?” (the competence question)

This is a live Blog covering the oral arguments in real time. Please refresh the UKSC Blog homepage throughout the day in order to get the latest posts. Today’s live blog team comprises Tobias Seger, Finn O’Neill, Andrew Park and Jessica Eaton. Francesca Knight and James Warshaw will be in-person within Court 1 today and will provide a round-up of the key takeaways this evening. All bloggers are CMS Cameron McKenna Nabarro Olswang LLP Associates and Trainee Solicitors.

For a summary of the arguments, and the SNP’s written case, please refer to the excellent case preview drafted by CMS Senior Associate, Alan McDonald. Yesterday’s live Blog is available here, and a Day 1 round-up here.

During the course of today and tomorrow, the UK Supreme Court will hear oral arguments in the Lord Advocate’s Reference in relation to the Scottish Independence Referendum Bill (the “Bill”). The Court has been asked to determine whether it would be within the Scottish Parliament’s power to legislate for a second referendum on Scottish independence. 

The specific question posed by the Lord Advocate is “Does the provision of the proposed Scottish Independence Referendum Bill that provides that the question to be asked in a referendum would be “Should Scotland be an independent country?” relate to reserved matters? In particular, does it relate to: (i) the Union of the Kingdoms of Scotland and England; and/or (ii) the Parliament of the United Kingdom?”

The Lord Advocate (Dorothy Bain KC), will make arguments on behalf of the Scottish Government. The Advocate General (Lord Keith Stewart KC), will make arguments on behalf of the UK Government. Written arguments filed on behalf of the SNP will also be considered but the SNP will not be represented in Court.

Five Justices of the Court will hear the arguments and determine the question; Lord Reed, Lord Lloyd-Jones, Lord Sales, Lord Stephens, Lady Rose. Lord Reed is the President of the UK Supreme Court.

This is a live Blog covering the oral arguments in real time. Please refresh the UKSC Blog homepage throughout the day in order to get the latest posts. Today’s live blog team comprises Jessica Eaton, Charlotte Edgar, Sophie Campbell, Natalie Haefner, Amelia Mah, and Brooke Nisbet. Zainab Hodgson, Senior Associate at CMS, will be in-person within Court 1 today and will provide a round-up of the key takeaways this evening. All bloggers are CMS Cameron McKenna Nabarro Olswang LLP Associates and Trainee Solicitors. 

For a summary of the arguments, and the SNP’s written case, please refer to the excellent case preview drafted by CMS Senior Associate, Alan McDonald. 

Court will begin at 10:30am. 

0925: Today we will hear submissions from the Lord Advocate, Dorothy Bain KC. Tomorrow we will hear from the Advocate General, Lord Keith Stewart KC.

0921: You can read the biographies of the UKSC Justices here.

0917: You can read the UKSC Blog’s summary of the written arguments here.

0915: Good morning from the UKSC Blog team. The public will be able to watch the UK Supreme Court’s live feed of the proceedings from 10:30am on the UKSC website. The Lord Advocate’s written case can be found here. The Advocate General’s written case can be found here. The SNP’s written case can be found here. Five Justices will hear the case; Lord Reed (President of the UK Supreme Court and Scottish Justice), Lord Lloyd-Jones, Lord Sales, Lord Stephens, and Lady Rose. 

 

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

On Tuesday 11th and Wednesday 12th October, the court will hear the Reference by the Lord Advocate of devolution issues under paragraph 34 of Schedule 6 to the Scotland Act 1998. The court will hear submissions on the proposed Scottish Independence Referendum Bill; in particular whether a provision within the Bill that provides the question to be asked in a referendum relates to reserved matters or not. The case will be heard at 10:30 in Courtroom Two, and will continue on Wednesday from 10:30.

On Wednesday 12th October, the court will hand-down judgment in the case of DCM (Optical Holdings) v Commissioners for His Majesty’s Revenue and Customs, which is on appeal from [2020] CSIH 60 and was heard on the 8th of February 2022. It concerns tax assessments made in 2005 and whether they were out of time and therefore time barred, and whether HMRC has an implied power to refuse to accept a sum claimed by a taxpayer by way of input tax. The judgment will have the citation [2022] UKSC 26.

The following Supreme Court judgments remain outstanding: (As of 12/10/22)

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
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
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
Hillside Parks Ltd v Snowdonia National Park Authority, heard 4th July 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
of DCM (Optical Holdings) v Commissioners for His Majesty’s Revenue and Customs, heard 12th October 2022.

In this post, Clare Montgomery KC of Matrix Chambers comments on the decision in Craig v Her Majesty’s Advocate (for the Government of the United States of America) and another (Scotland) [2022] UKSC 6. The Government unanimously allowed Craig’s appeal, holding that a new extradition hearing may be held before a different sheriff.

 

Background

James Craig is charged in the United States with posting false information on Twitter in order to affect the price of shares and to trade in them to his own advantage. In 2017 the United States applied to extradite him. Mr Craig maintains that, since the conduct took place in Scotland, he should be tried in Scotland.  He seeks to invoke a ‘forum bar’ defence. This is a protection, recommended by the Committee reviewing US/UK extradition arrangements in 2012, to correct the arbitrary use of US long arm jurisdiction in extradition cases. It was considered to be in the interests of justice for decisions about forum, in cases where there was concurrent jurisdiction between States, to be taken by a judge in open court, where the person whose extradition was requested would have the opportunity to put his case, rather than in private by prosecutors. The Committee recommended that the Government introduce a forum bar as soon as possible. A forum bar was accordingly inserted into both parts of the Extradition Act 2003. In the case of the USA, which is governed by Part 2, section 83A contains the detailed forum protection provisions.

The forum bar was brought into force in England, Wales and Northern Ireland on 14 October 2013. It was not brought into force in Scotland. Mr Craig could therefore not rely on it in his defence in 2017. In 2018 the Outer House, Court of Session (Craig v Advocate General for Scotland [2018] CSOH 117) held that the refusal to bring the forum bar into force in Scotland (for which no adequate explanation was ever provided) was unlawful. Lord Malcolm made a declaration to that effect. The decision was not appealed but the Government continued to refuse to bring the forum bar into effect and Mr Craig was ordered to be extradited in 2020. In 2021 the forum bar provisions were finally brought into force in Scotland but without any retrospective effect.

 

Procedural irregularity or affront to the rule of law?

The Government argued that its failure to commence the forum bar provisions made no difference. However, as the courts observed, if that were true, it would be hard to see why they were enacted, and the Scottish Government opposed their commencement. The provision clearly provided an open justice protection from inappropriate long arm jurisdiction.

More troubling was the argument that the Government was entitled to act unlawfully in the absence of an order for specific performance. This was a startling submission. The Government had no lawful justification for refusing to bring in the forum bar protection. It had been told that in the 2018 declaration. It had a duty to act in conformity with that order. Its refusal to do so without compulsion threatened the constitutional expectation underpinning the relationship between the Government and the courts. The courts had always previously been willing to forbear from making coercive orders against the Government, and to make declaratory orders instead. But trust depended on the Government’s compliance with declaratory orders in the absence of coercion. As Lord Reed, President, writing for the Court said; “it is because ours is a society governed by the rule of law, where the Government can be trusted to comply with court orders without having to be coerced, that declaratory orders can provide an effective remedy.”

The Government claim that any illegality was of a merely procedural nature received equally short shrift from Lord Reed. The procedure followed was not “in accordance with the law” within the meaning of article 8 of the Convention so that the extradition process was incompatible with convention rights and therefore invalid.

There is an unfortunate similarity between the approach of the Government in Craig and the behaviour to the Government in R (on the application of Majera (formerly SM (Rwanda)) v Secretary of State for the Home Department [2021] UKSC 46. Mr Majera had been granted bail by the First Tier Tribunal which permitted him to carry out unpaid voluntary work. The Home Secretary ignored the order because it was considered to be unlawful. Lord Reed, President, again writing for the court, pointed out the legal duty to obey a court order which has not been set aside. “It is a basic principle that a decision of a court is binding as between the parties, and cannot be ignored or set aside by anyone, including (indeed it may fairly be said, least of all) the executive”. This applies to orders which are claimed to be invalid, as well as to orders which are merely irregular.

It might be thought that these cases illustrate a profound unwillingness on the part of the Government to respect individual rights where those rights appear to conflict with some popular policy objective. The case may also demonstrate the differences emerging between the executive and the courts about the importance of the rule of law. The new Lord Chancellor, whose oath requires him to respect the rule of law, is the same man who appeared to accept that the UK might nevertheless wish to “break international law in a very specific and limited way”. The Lord Chancellor will now need to reflect on whether the rule of law is still a central feature of the relationship between the executive and the courts.

 

Related:

New Judgments summary

Judgment