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In this post, Jack Prytherch, Of Counsel in the Tax team at CMS, previews the decision awaited from the Supreme Court in Commissioners for Her Majesty’s Revenue and Customs v NHS Lothian Health Board [2020] CSIH 14. The appeal was heard by the Supreme Court on 8 and 9 June 2022. The Supreme Court was asked to consider the correct approach that should be taken by HMRC and the courts to evidence, and the burden and standard of proof, in historical claims for the recovery of overpaid VAT.

Background

The law in relation to VAT broadly confers a right to deduct the amount of any VAT on input expenditure for business activities. Where such ‘input tax’ is unrecovered so that VAT has been overpaid, it is possible to make a claim for prior periods (subject to any applicable statutory time limits).

Claims for overpaid VAT, potentially going back as far as the inception of VAT in 1973, are known as ‘Fleming claims.’ They are so called after the decision of the House of Lords in Fleming (trading as Bodycraft) and Condé Nast Publications Ltd v Commissioners for Her Majesty’s Revenue and Customs [2008] UKHL 2, which concerned the way in which the then UK statutory time limit on making claims for overpaid VAT had been introduced. Finance Act 2008, s 121 was subsequently introduced to limit the scope for making such claims by introducing a new transitional period ending 1 April 2009, before which any such claims had to be made.

The taxpayer, NHS Lothian Health Board (“NHS Lothian”), is an NHS trust responsible for the provision of health services within the Lothian area of Scotland. Together with its predecessors, NHS Lothian operated scientific laboratories during the period between 1974 and 1997. Most of the work performed in the laboratories was carried out for the clinical purposes of the taxpayer and therefore consisted of non-business activities for VAT purposes. Nevertheless, NHS Lothian also carried out work for persons outside the NHS, including local authorities and pharmaceutical companies, which constituted business activities for VAT purposes (meaning that input tax incurred for the purposes of such activities should have been recoverable). Unfortunately, prior to 1994, the VAT liability of NHS boards such as NHS Lothian was handled by the Scottish Office, and during that period (and until the year 1995/1996) it was the general practice of public bodies not to make claims to recover input tax on business activities.

Against that background, NHS Lothian made a global Fleming claim for the period from 1 April 1974 to 30 April 1997 which included the business activities of its laboratories. That claim was rejected by HMRC and NHS Lothian appealed to the First-tier Tribunal (Tax Chamber) (“FTT”).

Decisions of the Tribunals

The primary issue in Fleming claims is often not the existence of the taxpayer’s claim to recover overpaid VAT but instead whether that claim can be quantified with sufficient accuracy to permit an order for repayment to be made. The reason for this is that historical financial records are likely to have been destroyed or otherwise lost over time. Taxpayers are therefore reliant on some other evidence to support historical claims.

For the purposes of its Fleming claim, NHS Lothian had based its calculations on a separate claim made for the year 2006/2007 in respect of which financial records remained available and for which HMRC had agreed that the recoverable amount should be 14.7% of the total costs of the laboratories. NHS Lothian sought to extrapolate that same agreed percentage backward to earlier years and also presented detailed evidence, accepted by the FTT, that the activities of the laboratories had not changed significantly throughout the relevant period.

However, the FTT held that the evidence presented by NHS Lothian was not sufficiently precise to use as a basis for the quantification of the claim. For example, while NHS Lothian had presented witness evidence confirming that there had been no changes to the general pattern of activity over the relevant period, there had not been any reference to reliable primary data (e.g., sales ledgers or copy tax invoices), and the time-scale involved undermined the likely accuracy of the proposed extrapolation as amounts were bound to fluctuate. The FTT therefore dismissed NHS Lothian’s claim in its entirety, and that decision was subsequently upheld by the Upper Tribunal.

Decision appealed

On appeal to the Inner House of the Court of Session, two principal questions arose:

firstly, whether the fundamental right to repayment of overpaid VAT, guaranteed by EU law and the principle of effectiveness, means that, if the taxpayer’s methodology for calculating the amount of repayment were rejected, HMRC and the Tribunals were not permitted to reject completely the taxpayer’s claim solely on the basis of difficulties with identifying a satisfactory methodology or difficulties of proof; and

secondly, whether, having regard to the fundamental EU law requirement that the right to recover overpaid VAT should not be rendered excessively difficult or impossible in practice under domestic law (the principle of effectiveness), HMRC and the Tribunals should adopt a flexible approach to the burden and standard of proof in connection with historical claims for repayment.

The Inner House answered both questions in the affirmative and allowed NHS Lothian’s appeal, setting aside the FTT’s decision and remitting the case to a differently constituted FTT for reconsideration. It is that decision of the Inner House that is the subject of the appeal to the Supreme Court.

According to the Inner House, the FTT had imposed too high a test on NHS Lothian as the taxpayer. The existence of a claim to recover overpaid VAT was not in issue; all that was in dispute was the quantum. That meant that some amount of input tax must be due to the taxpayer (whereas, if the FTT were correct, none of that amount would be recovered). As such, where it is clear that some repayment of tax is due, the Inner House considered that it should normally be possible to arrive at some sort of quantification of the amount due and “exceptional circumstances” would be required to render such quantification impossible. If necessary, the FTT should perform the appropriate calculations itself or at least state the principles by reference to which the calculation should be made. As a last resort, it should also be possible to discount an estimated amount to reflect the uncertainty.

In this case, the reason for the lack of primary evidence was the historical nature of the claim, which the Inner House noted was in large part caused by the failure of the UK to properly implement the EU law right to reclaim input tax and also by the fact that NHS Lothian’s VAT affairs were at one time under direct government control. In such circumstances, a “reasonably generous approach” should be taken to historical claims and the failure of the taxpayer to produce primary evidence could not be given the level of significance as attributed by the FTT.

The Inner House determined, therefore, that the critical question should be whether, in the light of the absence of sufficient primary evidence, the taxpayer has succeeded in proving the quantification of its claim on the balance of probabilities by using such secondary evidence as exists and drawing inferences from that evidence. According to the Inner House, that is not a test of certainty or even near certainty, but instead a question of whether the taxpayer’s calculation of the repayment due is more likely to amount to a proper quantification of its claim than the alternative (i.e., no input tax being repayable whatsoever).

Comment

This case highlights the difficulties that can be faced by taxpayers in evidencing historical Fleming claims for overpaid VAT, as well as the tough approach taken by HMRC in respect of such claims. The number of outstanding Fleming claims, for obvious reasons, is diminishing. However, the upcoming decision of the Supreme Court should also have relevance to other situations where the taxpayer is required to produce evidence to quantify a claim for repayment and the general principles that should be applied by HMRC and the FTT in such circumstances.

 

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

On Tuesday 12th July, the Court will hear the case of DB Symmetry Ltd and another v Swindon Borough Council at 10:30am in Courtroom Two. The UKSC will hear submissions on whether the principle enunciated by the Court of Appeal in Hall & Co Ltd v Shoreham by Sa Urban DC [1964] 1 WLR 240 is correct in law. The judgment being appealed is [2020] EWCA Civ 1331.

The following Supreme Court judgments remain outstanding: (As of 6/7/22)

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
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
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.

In this post, Sam Porter, an Associate in the Planning team at CMS, previews the upcoming Supreme Court hearing in the case of Hillside Parks Limited v Snowdonia National Park Authority UKSC 2020/0211. The case was heard on 4 July 2022.

Background

Hillside Parks Limited (“HPL”) is the owner of an approximately 30-acre site in Aberdyfi, Snowdonia, which it acquired in the late 1980s. In 1967, planning permission was granted for a large housing development on the site (“1967 Permission”). The approved plan (“Original Master Plan”) identified the proposed location of the buildings and roads which comprise the development.

From 1967 to 1974, eight further planning permissions were granted which permitted the development to be constructed in a manner that differed from the Original Master Plan. Some of these permissions were implemented.

High Court proceedings were first brought in 1985. At this point, a small number of buildings had been constructed, all of them pursuant to the permissions granted after the 1967 Permission, rather than under the 1967 Permission itself. The landowner sought declarations regarding the status of the 1967 Permission (and in particular whether it had lapsed). In his judgment, Drake J granted four declarations, the third of which is most relevant. In summary, this declaration was that the development pursuant to the 1967 Permission had commenced and could be lawfully completed at any time in the future (the “Third Declaration”).

Following the 1987 judgment, Snowdonia National Park Authority (“Snowdonia”) became the local planning authority for the site. A series of further planning permissions were granted by Snowdonia in the period from 1996 to 2011 which permitted additional changes from the Original Master Plan. From 1987 onwards, the developments carried out at the site were all pursuant to the permissions granted following the 1967 Permission.

In 2017, Snowdonia informed HPL that it considered that it was no longer possible to implement the 1967 Permission. This was on the basis that it was no longer physically possible to build the development in a manner which was consistent with the Original Master Plan.

Procedural History

The present proceedings began as a claim under Part 8 of the Civil Procedure Rules. HPL sought declarations that:

1. Snowdonia was bound by the judgment and declarations of Drake J;

2. the 1967 Permission is valid and extant; and

3. the development may be carried out under the 1967 Permission until completion, except to the extent that any development has been carried out or is carried out pursuant to subsequent planning permissions.

In Hillside Parks Limited v Snowdonia National Park Authority [2019] EWHC 2587 (QB), HHJ Keyser QC considered that there were two issues. Firstly, whether Drake J’s Third Declaration was wrong in law, and secondly, whether Snowdonia remained bound by the Third Declaration.

In respect of the first issue, the judge found no error in law. He considered that future development carried out under the 1967 Permission could no longer be lawful as the development carried out pursuant to the permissions granted since 1967 now made it physically impossible to develop the site in accordance with the Original Master Plan. In particular, some of the homes are not built in the position shown on the Original Master Plan and, indeed, are in some cases located where the Original Master Plan stipulated that roads and footpaths should be built. Therefore, development which had occurred since 1987 meant that Snowdonia could no longer be bound by the Third Declaration.

The case was appealed to the Court of Appeal, where Singh LJ gave the leading judgment. Singh LJ found that the High Court judge had been entitled to reach the view that it was no longer physically possible to implement the 1967 Permission.

HPL also argued that the judge had been wrong to rule that F. Lucas & Sons Ltd v Dorking and Horley Rural District Council (1966) 17 P & CR 111 did not apply. The Lucas judgment indicates that planning permissions may, in some circumstances, be construed as authorising a series of independent acts. Following this approach, although it may be physically impossible to carry out the development permitted by the original permission on part of a site, this would not render it unlawful to carry out independent acts of development under that permission elsewhere on the site. The Court of Appeal said that Hillside was not a Lucas case and observed that Lucas was “a highly exceptional case”.

HPL also contended that the proceedings represented an abuse of process. The doctrine of abuse of process requires that once an issue has been fully and finally decided by the courts, the parties cannot normally raise subsequent legal arguments which could have been raised in the initial proceedings. HPL argued that it was an abuse of process for Snowdonia to make arguments based on Pilkington v Secretary of State for the Environment [1973] 1 WLR 1527 (which relates to the incompatibility of planning permissions) when that case had been decided in 1973 and yet had not been raised by Snowdonia’s predecessor in title in the High Court proceedings in the 1980s.

In considering whether an abuse of process had occurred, Singh LJ explained that a “merits-based assessment” of all the facts was required, including both the public and private interests affected. As well as HPL’s commercial interests, there were also “important public interests at stake”, including preventing inappropriate development in a National Park. Singh LJ considered it relevant that Snowdonia had apparently, for some time prior to 2017, maintained that the 1967 Permission could be implemented on areas of the site which had not been developed pursuant to subsequent permissions; but this factor was not conclusive. The factual and legal developments since 1987 meant that Snowdonia’s arguments were not an abuse of process. Notably, the Court of Appeal stated that subsequent case law, including Sage v Secretary of State for the Environment [2003] UKHL 22, has placed greater emphasis on the need to view planning permissions as a whole rather than as consent for delineable acts of development.

Issues on Appeal

There are two main issues before the Supreme Court:

(1) Can the court to take into account the public interest in not permitting inappropriate development in a National Park, when deciding whether it would be an abuse of process for a party to make an argument which it failed to make in earlier legal proceedings?

(2) Where there are successive planning permissions relating to the same site, and the later permissions are for changes to one part of a wider development approved under the original planning permission, does the implementation of the later permission(s) render the original permission completely unimplementable? Or, in the alternative, could development pursuant to the original permission still be carried out in areas of the site which have not been developed under the later permission(s)?

The Supreme Court considered these issues during a one-day hearing on 4 July 2022.

Comment

The Supreme Court’s judgment will confirm whether it is lawful to continue development under an earlier permission once there has been a “drop-in” or “slot-in” planning permission covering part of a scheme authorised by the earlier consent. Drop-in permissions are quite common and have often been used by developers to change discrete parts of a development. Therefore, this judgment is significant and will be of great interest to developers and those with an interest in sites built under a drop-in permission. The Court of Appeal declined to express a view on whether the implementation of drop-in permissions would render development already carried out under the original permission unlawful. It will be interesting to see how the Supreme Court approaches this complexity. In addition, it will be interesting to see if the Supreme Court differentiates between the position where there is an outline or a detailed planning permission.

The Supreme Court will also have the opportunity to provide further guidance on the doctrine of abuse of process and which factors may be taken into account when the issue of abuse is considered. This will have ramifications for civil litigation more broadly.

On appeal from [2020] UKEAT/0223/19

The Appellant (a national of the Philippines) is a migrant domestic worker who worked in the household of the Respondent, a diplomat representing the Kingdom of Saudi Arabia in the United Kingdom. Ms Wong claims to be a victim of human trafficking who was forced to work for Mr Basfar and his family in circumstances of modern slavery after they brought her with them to the UK in August 2016.

Ms Wong brought a claim against Mr Basfar in an employment tribunal for wages and breaches of employment rights. Mr Basfar applied to have her claim struck out on the ground that he has diplomatic immunity from suit. Under article 31 of the Vienna Convention on Diplomatic Relations 1961 (the “Diplomatic Convention”), diplomatic agents enjoy complete immunity from the criminal jurisdiction of the receiving state and are also generally immune from its civil jurisdiction. There is, however, an exception for civil claims relating to “any professional or commercial activity exercised by the diplomatic agent in the receiving State outside his official functions.”

The issue is whether the conduct alleged constitutes a “commercial activity exercised” that is outside official functions.

The employment tribunal declined to strike out Ms Wong’s claim. The Employment Appeal Tribunal allowed Mr Basfar’s appeal but issued a certificate that the case was suitable for an appeal directly to the Supreme Court, “leapfrogging” the Court of Appeal.

 

HELD – By a majority of three to two, allowing the appeal and deciding that, if the facts alleged are proved, Mr Basfar does not have diplomatic immunity in relation to the claim.

 

Diplomatic immunity is a fundamental principle of national and international law. Its purpose is to ensure the efficient performance of the functions of diplomatic missions as representing States. Article 31 of the Diplomatic Convention provides for only limited exceptions from immunity, one of which is the “commercial activity” exception. Also relevant is article 42, which states that a diplomatic agent “shall not in the receiving state practise for personal profit any professional or commercial activity.”

The majority agreed with Mr Basfar’s contention that the ordinary employment of a domestic worker by a diplomat does not constitute a “commercial activity” within the meaning of the exception. As a matter of language, hiring a domestic worker is capable of being described as exercising a “commercial activity”. But the scope of the exception cannot be determined just by interrogating the ordinary meaning of the words used: it is also necessary to consider the purpose of the provision. It would be contrary to the purpose of conferring immunity on diplomatic agents to interpret the words “any … commercial activity” as including activities incidental to the ordinary conduct of daily life of diplomats and their families in the receiving state, such as purchasing goods and services for personal use.

However, Lord Briggs and Lord Leggatt reject Mr Basfar’s contention that the same is true of the trafficking and exploitation of a domestic worker by a diplomat. Exploiting a domestic worker by compelling her to work in conditions of modern slavery is not comparable to an ordinary employment relationship that is incidental to the daily life of a diplomat. There is a material and qualitative difference between these two activities: employment is a voluntary relationship, entered into freely and governed by the terms of a contract, whereas the essence of modern slavery is that work is extracted by coercing and controlling a victim.

The extent of control over Ms Wong’s person and dominion over her labour exercised by Mr Basfar on the assumed facts of this case was so extensive and despotic as to place her in a position of domestic servitude. Further, on the assumed facts Mr Basfar gained a substantial financial benefit by deliberately and systematically exploiting Ms Wong’s labour for almost two years, initially for a fraction of her contractual entitlement to wages and latterly for no pay at all. This conduct is accurately described as a commercial activity practised for personal profit.

In the view of the majority, the appropriate criteria for distinguishing between (i) ordinary domestic employment arrangements that are incidental to the daily life of a diplomat in the receiving state and are covered by immunity, and (ii) exploitation of a domestic worker for profit which falls within the exception for any “commercial activity” exercised by a diplomatic agent, are the concepts of servitude, forced labour and human trafficking recognised in international law and now often grouped together under description “modern slavery”. On the assumed facts, this case falls within all these categories and is a paradigm example of domestic servitude.

The majority concludes that, if the facts alleged by Ms Wong are proved, Mr Basfar does not have immunity from the civil jurisdiction of the UK courts. However, unless admissions are made, a hearing is required to determine the truth of the allegations.

Lord Hamblen and Lady Rose dissent. Although they agree with the majority on the principles of interpretation and that the normal employment of a domestic worker does not amount to “commercial activity” within the exception, they disagree with the majority’s conclusion that the conditions under which a person is employed or how they came to be employed can convert employment which is not of itself a “commercial activity” into such an activity falling within the exception. Modern international instruments designed to eliminate the abhorrent practices of trafficking, modern slavery, forced labour and domestic servitude contain nothing suggesting that the meaning of the term “commercial activity” has been expanded now to include trafficked employment. The majority’s expansion of the commercial activity exception risks seriously undermining the scope of diplomatic immunity by creating an uncertain boundary between what is and is not covered, as well as exposing the UK’s diplomats overseas to formal or informal retaliatory measures.

To view the judgment, please see:

Judgment (PDF)
Judgment on The National Archives (HTML version)
Judgment on BAILII (HTML version)

For the Press Summary, please see:

Press summary (HTML version)

Watch hearing

13 Oct 2021
Morning session
Afternoon session

14 Oct 2021
Morning session
Afternoon session

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

On Monday 4th July, the Court will hear the case of Hillside Parks Ltd v Snowdonia National Park Authority, on appeal from [2020] EWCA Civ 1440. The issue in this case relates to successive planning permissions granted over the same site, and how they should be implemented. The hearing will begin at 11:00 in Courtroom One.

On Wednesday 6th July, the Court will hand down judgment in Basfar v Wong [2022] UKSC 20. The Court will decide on the scope of diplomatic immunity in relation to a trafficked individual employed at a UK residence, and the current law in relation to immunity as a whole. Hand down will take place at 09:45 in Courtroom One.

The following Supreme Court judgments remain outstanding: (As of 6/7/22)

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
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
Hillside Parks Ltd v Snowdonia National Park Authority, heard 4th July 2022

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.

Judgment (PDF)
Press summary (HTML version)
Judgment on The National Archives (HTML version)
Judgment on BAILII (HTML version)

Watch hearing

28 Apr 2022
Morning session
Afternoon session

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.

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.

For the judgment, please see:

Judgment (PDF)
Judgment on The National Archives (HTML version)
Judgment on BAILII (HTML version)

For the Press Summary, please see:

Press summary (HTML version)

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 – 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.

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.

 

Judgment (PDF)

Press summary (HTML version)

Watch hearing:

19 Oct 2021 Morning session Afternoon session