Case Comment: Bloomberg LP v ZXC [2022] UKSC 5

In this post, Jessica Eaton, an associate in the litigation team at CMS, comments on the Supreme Court’s decision in the Bloomberg LP v ZXC [2022] UKSC 5, case which concerned the right to privacy in the context of a criminal investigation.

On 16 February 2022, the Supreme Court handed down their unanimous decision in favour of ZXC.

The Supreme Court held that, in general, a person under criminal investigation has, prior to being charged, a reasonable expectation of privacy in respect of information that relates to that investigation.

Background

The case concerns the publication of a 2016 article by Bloomberg relating to the activities of a publicly listed company for which ZXC worked as the chief executive of one of its regional divisions (the “Article”).

The Article was based almost entirely on the contents of a Letter of Request (the “LoR”) which had been sent by a UK law enforcement body (the “UKLEB”) to their foreign counterpart seeking assistance with the criminal investigation into possible offences of corruption, bribery, offences under the Proceeds of Crime Act 2002, the Fraud Act 2006, as well as the conspiracy to commit certain offences. The letter was headed up “confidential” and in relation to confidentiality contained the following statement:

“…In order not to prejudice the investigation, I request that no person (including any of the above named subjects) is notified by the competent authorities in your country of the existence and contents of this Letter of Request and any action taken in response to it… the reason for requesting confidentiality is that it is feared that, if the above suspect [sic] or an associated party became aware of the existence of this request or of action taken in response to it, actions may be taken to frustrate our investigation by interference with documents or witnesses.”

In addition, and prior to publication of the Article, Bloomberg contacted the UKLEB. During their correspondence, the UKLEB repeatedly expressed concerns about the threatened publication and made it clear to Bloomberg that “the publication of material pertaining to a LoR will pose a material risk of prejudice to a criminal investigation.” ZXC’s solicitors also expressed concerns in response to Bloomberg’s threat of publication of the confidential contents of a LoR.

Bloomberg proceed to publish. In response, ZXC brought a claim for misuse of private information. ZXC argued that he had a reasonable expectation of privacy in the content of the Article and that his right to privacy was not outweighed by Bloomberg’s right to publish. The first instance court agreed and upheld ZXC’s claim for misuse of private information, awarded £25,000 in damages, and granted an injunction against further publication in the jurisdiction.

Bloomberg’s appeal to the Court of Appeal was dismissed. The Supreme Court has upheld that decision and ruled for ZXC.

First instance decision

Liability for misuse of private information is determined by the application of a two-stage test. Stage one concerns an objective analysis of whether the claimant has a reasonable expectation of privacy in the relevant information in the circumstances. If it is held that the claimant does have such an expectation, the court moves onto stage two of the test which involves a balancing act between the claimant’s right to privacy in the information (his Article 8 right) and the publisher’s right to publish it (their Article 10 right).

In relation to stage one, the court considered the relevant authorities and concluded that “it is possible now to say that, in general, a person does have a reasonable expectation of privacy in a police investigation up to the point of charge” and that, therefore, ZXC had a reasonable expectation of privacy in the contents of the LoR. That entitlement was not invariable, however. The court noted that the entitlement was fact dependent. In the case of ZXC, the obviously confidential nature of the LoR and the circumstances in which the letter came to be in Bloomberg’s possession, meant that Bloomberg was bound to, in the Supreme Court’s summary of Nicklin J’s judgment, “observe the confidentiality of the Letter of Request”.

In relation to stage two, the judge considered whether the public interest in the UKLEB investigation (Bloomberg’s argument in favour of publication) outweighed ZXC’s reasonable expectation of privacy. He held it did not. In fact, the judge found that “there was a very clear public interest that the contents of the LoR should not be published and that the confidentiality of UKLEB’s investigations should be maintained”.

Court of Appeal

Bloomberg appealed to the Court of Appeal.

In relation to stage one, Simon LJ agreed with the lower court that a person, such as ZXC, had a reasonable expectation of privacy in the fact of a criminal investigation up until the point of charge. The position is summarised at paragraph 82 of his judgment where he states that:

“… I would take the opportunity to make clear that those who have simply come under suspicion by an organ of the state have, in general, a reasonable and objectively founded expectation of privacy in relation to that fact and an expressed basis for that suspicion. The suspicion may ultimately be shown to be well-founded or ill-founded, but until that point the law should recognise the human characteristic to assume the worst (that there is no smoke without fire); and to overlook the fundamental legal principle that those who are accused of an offence are deemed to be innocent until they are proven guilty.”

As did Nicklin J, Simon LJ accepted that the expectation was not invariable. Rather, the general rule, applicable in this case, that the subject of a criminal investigation has a reasonable expectation of privacy in the fact of that investigation up to the point of charge is “the legitimate starting point.”

In relation to the second stage, Simon LJ found no reason to reach a different conclusion to the first instance court. ZXC’s Article 8 rights were not outweighed by Bloomberg’s countervailing Article 10 rights.

The appeal to the Supreme Court

Bloomberg appealed to the Supreme Court. The issues that arose on appeal were the following;

“(1) Whether the Court of Appeal was wrong to hold that there is a general rule, applicable in the present case, that a person under criminal investigation has, prior to being charged, a reasonable expectation of privacy in respect of information relating to that investigation.

(2) Whether the Court of Appeal was wrong to hold that, in a case in which a claim for breach of confidence was not pursued, the fact that information published by Bloomberg about a criminal investigation originated from a confidential law enforcement document rendered the information private and/or undermined Bloomberg’s ability to rely on the public interest in its disclosure.

(3) Whether the Court of Appeal was wrong to uphold the findings of Nicklin J that the claimant had a reasonable expectation of privacy in relation to the published information complained of, and that the article 8/10 balancing exercise came down in favour of the claimant.”

Most of the Supreme Court’s decision is dedicated to the first issue. Issue 2 is dealt with briefly and issue 3 was held to be dependent upon Bloomberg establishing that the Court of Appeal had erred in law on issues 1 and 2 which, the Supreme Court concluded it had not.

In relation to issue 1, the Supreme Court stated that “in order to establish misuse of private information, a claimant must first show that the information in question is private. The test at stage one is whether there is objectively a reasonable expectation of privacy taking into account all the circumstances of the case, including but not limited to, the so-called Murray factors” (which emerged from the well-known Murray v Express Newspapers plc [2008] EWCA Civ 446 case). These factors are;

(1) the attributes of the claimant;

(2) the nature of the activity in which the claimant was engaged;

(3) the place at which it was happening;

(4) the nature and purpose of the intrusion;

(5) the absence of consent and whether it was known or could be inferred;

(6) the effect on the claimant; and

(7) the circumstances in which and the purposes for which the information came into the hands of the publisher

Importantly, Issue 1 is confined to stage one of the test – the stage at which the reasonable expectation is established – and to whether or not the Supreme Court agrees that it should be the “legitimate starting point” or general rule as per the Court of Appeal’s decision.

Before reaching a conclusion on this issue, the Supreme Court considered it appropriate to define the “legitimate starting point” phrase used by Simon LJ.

In that regard the Supreme Court, stated first and foremost that “the general rule or legitimate starting point is not a legal rule or legal presumption, let alone an irrebuttable presumption. The determination as to whether there is a reasonable expectation of privacy in the relevant information is a fact specific enquiry.” Second, that the general rule is not invariable (a point made by both lower Courts). In other words, there may well be criminal investigations in which the expectation does not arise (the Supreme Court gave the example of public rioting, a behaviour which the court in In Re JR38 made clear Article 8 is not designed to protect). Third, the existence of the general rule does not mean that the claimant is relieved from the job of setting out the circumstances that demonstrate the reasonable expectation. Fourth, if the expectation does arise but due to the factual circumstances is a reduced expectation, then that will have an impact on the strength of the Article 8 arguments at stage two. And finally, the rationale of the starting point is that publication of the relevant information can cause “harm and damage” that is on occasion “irremediable and profound.”

The Supreme Court went on to say that it considered the general rule in relation to this category of information (fact of a criminal investigation, prior to the point of charge) to operate in a similar way to general rules in relation to other categories of information (e.g. – health-related information – a category widely considered to give rise to a reasonable expectation of privacy). As with any general rule, exceptions may arise, but, for example, in respect of health-related information, there would have to be strong countervailing factors to reach a conclusion otherwise than that the information is private.

In their appeal to the Supreme Court, Bloomberg challenged the Court of Appeal’s “general rule” or “legitimate starting point” approach, essentially on the basis that it underestimated the public’s ability to appreciate the importance of the presumption of innocence so as not to presume guilt and overestimated the capacity of the publication to cause damage to reputation. Bloomberg also submitted that the lower courts had applied the incorrect legal test by giving undue weight to effect of publication on the claimant to the exclusion of the other Murray factors (listed above).

The Supreme Court rejected Bloomberg’s argument that in adopting the “legitimate starting point” approach, the lower courts had applied the wrong legal test and failed to consider properly all the Murray factors (with an overemphasis on Murray factor 6). This is not least because Nicklin LJ had considered that the most significant Murray factor was not the impact of the publication on the claimant (Murray factor 6) but rather “the circumstances in which and the purposes for which the information came into the hands of the publisher” (Murray factor 7).

Ultimately, the Supreme Court concluded that the lower courts were “correct in articulating such a legitimate starting point to the information in this case” and that “once the claimant has set out and established the circumstances, the court should commence its analysis by applying the starting point”. Importantly, the Supreme Court noted their preference for the “legitimate starting point” terminology so as to “emphasise the fact specific nature of the enquiry and to avoid any suggestion of a legal presumption.”

Significance and Comment

In order to appreciate properly the significance of the Supreme Court’s decision, it is important to consider the issues that did not arise for determination on appeal.

First, issue one – “whether the Court of Appeal was wrong to hold that there is a general rule, applicable in the present case, that a person under criminal investigation has, prior to being charged, a reasonable expectation of privacy in respect of information relating to that investigation” – was confined to stage one of the test. As noted above, the Supreme Court never got onto the balancing exercise involved in stage two of the test (issue 3) because that issue was held to be dependent upon Bloomberg establishing that the Court of Appeal had erred in law on issues 1 and 2 which, the Supreme Court concluded it had not.

Second, as “it was common ground that if someone is charged with a criminal offence there can be no reasonable expectation of privacy” the decision does not say anything about the application of the “legitimate starting point” from the point of charge or thereafter. And third, the determination in the appeal is confined to the information that relates to the investigation of the claimant by an organ of the state and not to the “distinct and separate situation that might arise if Bloomberg wished to publish information as to the results of its own investigations.”

Once the dust has settled, properly analysed, this important decision recognises a discrete point, that, in general, a person under criminal investigation has, prior to being charged (our emphasis), a reasonable expectation of privacy in respect of information that relates to that investigation. The decision does not assess the weight to be given to the competing Article 8 and Article 10 rights at stage two.

CMS acted for Bloomberg at the High Court.

 

New Judgment: Craig (AP) v Her Majesty’s Advocate (for the Government of the United States of America) and another (Scotland) [2022] UKSC 6

On appeal from [2020] HCJAC 22

The appellant is a British citizen living in Scotland. In May 2017, the US Government made a request for his extradition to the US, where he is accused of committing an offence relating to securities fraud.

The process for determining whether a person should be extradited from the UK is governed by the Extradition Act 2003 (“the 2003 Act”). By the Crime and Courts Act 2013 (“the 2013 Act”), Parliament inserted into the 2003 Act a number of provisions referred to as “the forum bar provisions”. These provisions aim to prevent extradition where the offences could be fairly and effectively tried in the UK, and it is not in the interests of justice that the requested person should be extradited. Section 61 of the 2013 Act provides that the forum bar provisions will “come into force on such a day as the Secretary of State may by order appoint”. The Secretary of State brought the forum bar provisions into force in England, Wales and Northern Ireland in October 2013, but he did not bring them into force in Scotland.

The appellant wanted to rely on the forum bar provisions in the extradition proceedings brought against him in Scotland. He therefore issued a claim against the Advocate General for Scotland and the Scottish Ministers, arguing that the Secretary of State’s failure to bring the forum bar provisions into force in Scotland was unlawful. In December 2018, the Outer House of the Court of Session found in the appellant’s favour and made an order in which it “declared… that in its continuing failure to bring into force in Scotland the extradition forum bar provisions… the UK Government is acting unlawfully and contrary to its duties under section 61 of [the 2013 Act]”.

Notwithstanding that order, the UK Government failed to bring the forum bar provisions into force in Scotland until September 2021. In the meantime, the Lord Advocate continued to pursue extradition proceedings against the appellant. In July 2019, a sheriff decided that there was no bar to the appellant’s extradition under the 2003 Act and that his extradition would be compatible with the European Convention on Human Rights (“the Convention”). The sheriff sent the matter on to the Scottish Ministers, who in September 2019 decided that the appellant should be extradited to the US.

 

HELD – Appeal unanimously allowed. A new extradition hearing may be held before a different sheriff, at which the appellant will be able to rely on the forum bar provisions (in addition to any other arguments properly available to him).

Section 57(2) of the Scotland Act 1998 provides that a “member of the Scottish Government has no power to… act, so far as the… act is incompatible with any of the Convention rights”. This means that the Lord Advocate has no power to conduct extradition proceedings against the appellant, and the Scottish Ministers have no power to order his extradition, if those acts are incompatible with the appellant’s rights under the Convention.

There is no dispute that the extradition of the appellant would interfere with his right to respect for his private and family life, as guaranteed by article 8(1) of the Convention. Such an interference could, however, be justified under article 8(2), if it is “in accordance with the law”, if it pursues a “legitimate aim”, and if it is “necessary in a democratic society”. To satisfy the first of those three requirements, the interference must be in conformity with domestic law and the domestic law must meet the requirements of the rule of law, so as to afford adequate legal protection against arbitrariness. This is an absolute requirement. The executive is afforded no margin of discretion in meeting it.

The interference with the appellant’s rights under article 8(1) was not “in accordance with the law”, within the meaning of article 8(2). The order made by the Outer House in December 2018 was expressed in the present tense, making clear that the Secretary of State was “continuing” to act in breach of section 61 of the 2013 Act by failing to bring the forum bar provisions into force. The Secretary of State had a duty to act in conformity with that order, and his failure to do so was unlawful. The extradition procedure followed in the appellant’s case did not therefore accord with section 61 of the 2013 Act.

It is no answer to this that the order made by the Outer House was merely declaratory, rather than coercive. It is firmly established that there is a clear expectation that the Government will comply with declaratory orders, and it is in reliance on that expectation that the courts usually refrain from making coercive orders against the Government and grant declaratory orders instead. This is one of the core principles of our constitution. It is vital to the mutual trust which underpins the relationship between the Government and the courts.

Accordingly, the extradition proceedings against the appellant were not conducted “in accordance with the law” and so were incompatible with his rights under article 8 of the Convention. It follows that the extradition order made against him is invalid.

 

Judgment (PDF)

Press summary (HTML version)

Judgment on BAILII (HTML version)

 

To view the hearings, please see below:

25 November 2021          Morning session               Afternoon session

 

This Week in the Supreme Court – w/c 21st February 2022

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

On Tuesday 22nd February, the Supreme Court will hear the case of Competition and Markets Authority v Pfizer Inc and Flynn Pharma Ltd, on appeal from [2020] EWCA 617. The issue is phrased as follows: ‘When considering what costs to award following an appeal before the Competition Appeal Tribunal from an infringement decision of the Competition and Markets Authority, is there a starting point and if so, what is it? In particular, was the Court of Appeal correct to decide that there is a starting point that no order for costs should be made against a regulator if it has been unsuccessful, except for a good reason, or is the starting point instead that an order for costs should be made against the regulator where it is unsuccessful?’ The hearing will begin at 10:30 in Courtroom One.

On Wednesday 23rd February, judgment will be handed down in Craig (AP) v Her Majesty’s Advocate (for the Government of the United States of America) and another, on appeal from [2020] HCJAC 22. The judgment will have the citation [2022] UKSC 6 and will be handed down at 09:45. The Court were asked whether the failure to bring into force certain amendments to the Extradition Act 2003 in Scotland gives rise to a breach of article 8 of the European Convention on Human Rights.

The following Supreme Court judgments remain outstanding: (As of 23/2/22)

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
Bott & Co Solicitors v Ryanair DAC, heard 20 May 2021
East of England Ambulance Service NHS Trust v Flowers and Ors, heard 22 June 2021
Basfar v Wong, heard 13th-14th October
Secretary of State for the Home Department v SC (Jamaica), heard 19th October
Commissioners for Her Majesty’s Revenue and Customs v Coal Staff Superannuation Scheme Trustees Ltd, heard 26th October
Harpur Trust v Brazel, heard 9th November 2021
FirstPort Property Services Ltd v Settlers Court RTM Company and others heard 10th 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
Croydon London Borough Council v Kalonga, heard 12th January 2022
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
R v Maughan, heard 27th 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
R (on the application of Coughlan) v Minister for the Cabinet Office, heard 15th February 2022
Competition and Markets Authority v Pfizer Inc and Flynn Pharma Ltd, heard 22nd February 2022

Case Preview: Commissioners for Her Majesty’s Revenue and Customs v NCL Investments Ltd and another

In this post, Andre Anthony, a senior associate in the Tax team at CMS, previews the decision awaited from the UK Supreme Court in Commissioners for Her Majesty’s Revenue and Customs v NCL Investments Ltd and another EWCA Civ 663. The appeal was heard by the Supreme Court on 25 and 26 January 2022. The Supreme Court was asked to consider whether accounting debits relating to the grant of share options to employees are a deductible expense for corporation tax purposes.

Background

The appeal turns on whether accounting debits relating to the grant of share options to employees are a deductible expense for corporation tax purposes.

The taxpayers were wholly owned subsidiaries of a holding company, Smith & Williamson Holdings Ltd (“SWHL”). The taxpayers employed staff whom they made available to other companies within the corporate group for a fee.

In 2003, SWHL settled an employee benefit trust which gave employees a contractual right to acquire shares in SWHL for a specified price. When options were granted to employees of one of the taxpayers, it would recognise an indebtedness to SWHL equal to the fair value of the options, which was settled monthly (“the Recharge”). The taxpayers passed the cost of the Recharge to the group companies using the services of their employees as part of the charge made to those companies.

The grant of the options was governed by the accounting standard International Financial Reporting Standard 2 (“IFRS 2”). Pursuant to IFRS 2, on the grant of a share option to an employee, the relevant taxpayer was required to recognise a debit in its income statement equal to the fair value of the options, regardless of whether the taxpayer had to pay any amount to the holding company or the trustee of the employment benefit trust in relation to the grant of those options, and recognise a capital contribution received from the holding company as a credit on its balance sheet.

The taxpayers claimed the debits as deductions in the computation of the profits of their trade for the purposes of corporation tax. HM Revenue & Customs (“HMRC”) refused the corporation tax deduction and issued “closure notices” disallowing the deductions.

Procedural history

At first instance, the taxpayers successfully appealed to the First-tier Tribunal against the closure notices. The First-tier Tribunal held that the taxpayers were entitled to claim deductions for corporation tax purposes as expenses against trading profits for ten accounting debits relating to the grant of share options to the taxpayers’ employees that were recognised in their respective income statements pursuant to IFRS 2. HMRC appealed to the Upper Tribunal.

The Upper Tribunal dismissed HMRC’s appeal on the following four grounds. First, the IFRS 2 debits were expenses incurred wholly and exclusively for the purposes of each taxpayer’s trade. Second, the Corporation Tax Act 2009 (the “Act”), s 54(1)(a) did not impose an additional requirement on what was an “expense” under the Act, ss 46 and 48. Third, the IFRS 2 debits were correctly categorised as revenue rather than capital items. Fourth, the Act s 1290 did not bar a corporation tax deduction whenever a company makes an outright payment to employees that are not subject to tax in the employees’ hands.

HMRC’s appealed against the decision of the Upper Tribunal to the Court of Appeal on the overall basis that the options could not be taken into account in the calculation of the taxpayers’ profits because there was no matching outflow of cash from the taxpayers.

In a unanimous decision, the Court of Appeal dismissed HMRC’s appeal, on two main grounds.

First, the Court of Appeal held that the combined effect of the Act, ss 46 and 48, was to define allowable expenses as those debits made in accordance with generally accepted accounting practice (“GAAP”) in calculating the profits of a trade. Those provisions did not require any further examination of whether such accounting debits were “expenses”. The use of “incurred” in the Act s 54(1)(a) did not impose any additional requirement. It was sufficient that the debit in respect of the options was required by IFRS 2.

The Court of Appeal agreed with the First-tier Tribunal that the debits in this case were required by IFRS 2 to reflect the consumption by the taxpayers of the services provided by the employees, who were in part remunerated by the grant of the options. The taxpayers consumed those services wholly and exclusively for the purposes of their trades, being the provision of their employees’ services to other group companies at a profit. It follows that the purpose requirement (s 54(1)(a)) was satisfied.

Second, the Court of Appeal held that the Act, s 1290 did not apply to deny or defer allowance of the relevant debits in this case on the basis that the deductions claimed by the taxpayers were not deductions in respect of an “employee benefit contribution”. The benefit received by an employee was the option. It was the option that entitled the employee to acquire shares at a price that might be less than their market value. The acquisition of shares on exercise of the option was not the benefit received by the employee, but the fulfilment of an existing contractual entitlement.

Comment

This case considers the interaction between tax law and GAAP. The Court of Appeal acknowledged that the “accounting treatment by the taxpayers of the grant of the options is central to the issues”. At the same time, the Court of Appeal remarked that on these facts, IFRS 2 produced a “counter-intuitive” and “surprising” result by “requiring a debit to profit and loss account even though there is no outflow of funds but prohibiting a debit that does recognise an outflow of funds(in respect of the Recharge). At the same time, the court acknowledged that accounting standards are the product of “careful expert evaluation and wide consultation” and “it is not for this court to question whether a standard is appropriate”. While the judgment of the Supreme Court is likely to turn on the specific facts of this case, it will be closely considered for any broader guidance concerning the interaction between tax law and GAAP.

 

New Judgment: Bloomberg LP v ZXC [2022] UKSC 5

On appeal from [2020] EWCA Civ 611

The Respondent is a US citizen. He and his employer were the subject of a criminal investigation by a UK Legal Enforcement Body. During that investigation, the UKLEB sent a confidential Letter of Request to the authorities of a foreign state seeking, among other things, information and documents relating to the Respondent. The Letter expressly requested that its existence and contents remain confidential.

The Appellant obtained a copy of the Letter and published an article based on its content. After the Appellant refused to remove the article from its website, and following an unsuccessful application for an interim injunction, the Respondent brought a successful claim against the Appellant for misuse of private information.

The Respondent claimed that he had a reasonable expectation of privacy. The first instance judge held that the Appellant had published private information that was in principle protected by article 8 of the European Convention on Human Rights (the “ECHR”); and that in balancing the parties’ rights under article 10 ECHR, the balance favoured the Respondent. An appeal against that judgment was dismissed by the Court of Appeal.

 

HELD – Appeal unanimously dismissed. It held that, in general, a person under criminal investigation has, prior to being charged, a reasonable expectation of privacy in respect of information relating to that investigation.

 

Misuse of private information is a distinct tort where liability is determined by applying a two-stage test. Stage one is whether the claimant objectively has a reasonable expectation of privacy in the relevant information considering all the circumstances of the case. Such circumstances are likely to include, but are not limited to, those identified in the Court of Appeal’s decision in Murray v Express Newspapers plc [2008] EWCA Civ 446 at para 36 (the so-called “Murray factors”). If so, stage two is whether that expectation is outweighed by the publisher’s right to freedom of expression. This involves a balancing exercise between the claimant’s article 8 ECHR right to privacy and the publisher’s article 10 ECHR right to freedom of expression, having due regard to section 12 of the Human Rights Act 1998.

 

Issue 1: The stage one test and whether the Court of Appeal was correct to hold that there is a general rule that a person under criminal investigation has, prior to being charged, a reasonable expectation of privacy in respect of information relating to that investigation.

It is widely accepted as a matter of public policy that there is a negative effect on an innocent person’s reputation in publishing that he or she is being investigated by the police or another state organisation. There is a uniform general practice by state investigatory bodies not to identify those under investigation prior to charge.

 

First, the Appellant submitted that there was no need for a general rule given the public’s ability to observe the presumption of innocence. The presumption of innocence is a legal presumption applicable to criminal trials. But in this different context, the question is how others, including a person’s inner circle, will react to the publication of information that that person is under criminal investigation.

Second, the Appellant argued that the courts’ reliance below on the “human characteristic” to equate suspicion with guilt runs contrary to well-established principles in defamation law such that the ordinary reasonable reader can distinguish suspicion from guilt and is not unduly suspicious or avid for scandal. But the Respondent did not bring a claim in defamation. The tort of misuse of private information is a separate tort with different constituent elements and a distinct purpose to protect an individual’s private life in accordance with article 8 ECHR, regardless of the truth or falsity of the information, and it is therefore inappropriate to read across concepts from the tort of defamation.

Third, the Appellant submitted that information should not be protected because it referred to the Respondent’s business activities and not his private life. This is an unduly restrictive view of the protection afforded by article 8 ECHR, which can include professional or business activities. A person’s reputation is within the scope of their article 8 ECHR “private life”.

Fourth, the Appellant argued the courts below failed to apply the correct legal test at stage one, involving a consideration of “all the circumstances of the case”. The nature of the activity in which ZXC was engaged is not a factor of particular significance here. The courts below gave due consideration to the applicable Murray factors in their multi-factorial analysis, including the Respondent’s status as a businessman involved in the affairs of a large public company. Whilst the Respondent’s status might mean that the limits of acceptable criticism are wider than for a private individual, there is a limit. The factor is not in itself determinative and should only form part of the stage one analysis.

Therefore, the courts below were correct to hold that, as a legitimate starting point, a person under criminal investigation has, prior to being charged, a reasonable expectation of privacy in respect of information relating to that investigation and that in all the circumstances this is a case in which that applies and there is such an expectation.

 

Issue 2: Whether the Court of Appeal was wrong to hold that, in a case in which a claim for breach of confidence was not pursued, the fact that the Appellant published information originating from a confidential law enforcement document rendered the information private and/or undermined the Appellant’s ability to rely on the public interest in its disclosure.

The judge was right to treat the Letter’s confidentiality as a relevant and important factor at both stage one and stage two but neither the judge nor the Court of Appeal held that the Letter’s confidentiality itself rendered the information private or prevented the Appellant from relying on the public interest on its disclosure. Whilst there is no necessary overlap between the distinct actions for misuse of private information and for breach of confidence, confidentiality and privacy will often overlap, and if information is confidential that is likely to support the reasonableness of an expectation of privacy.

 

Issue 3: Whether the Court of Appeal was wrong to uphold the findings of the first instance judge.

This ground of appeal was dependent upon establishing that the Court of Appeal erred in law on Issue 1 and/or Issue 2, which it has not done. Therefore, there are no grounds for intervening with the judge’s decision in relation to the balancing exercise.

Judgment (PDF)

Judgment on BAILII (HTML version)

Press summary (HTML version)

 

To view the hearings, please see below:

30 Nov 2021
Morning session
Afternoon session

1 Dec 2021
Morning session
Afternoon session

The Week in the Supreme Court – week commencing 14th February 2022 2022

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

On Tuesday 15th February, the Supreme Court will hear the case of R (on the application of Coughlan) v Minister for the Cabinet Office. This will take place at 10:30am in Courtroom One, and the judgment being appealed is [2020] EWCA 723. The Court will consider whether the voter identification (“ID”) pilot schemes that were implemented in the May 2019 local government elections were unlawful.

On Wednesday 16th February the UKSC will hand down judgment in Bloomberg LP v ZXC. The Court will decide whether, and to what extent, a person who has not been charged with an offence can have a reasonable expectation of privacy in relation to information that relates to a criminal investigation into his activities. The judgment being appealed is [2020] EWCA Civ 611, and hand-down will be at 9:45 in Courtroom 3.

The following Supreme Court judgments remain outstanding: (As of 14/2/22)

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
Bott & Co Solicitors v Ryanair DAC, heard 20 May 2021
East of England Ambulance Service NHS Trust v Flowers and Ors, heard 22 June 2021
Basfar v Wong, heard 13th-14th October
Secretary of State for the Home Department v SC (Jamaica), heard 19th October
Commissioners for Her Majesty’s Revenue and Customs v Coal Staff Superannuation Scheme Trustees Ltd, heard 26th October
Harpur Trust v Brazel, heard 9th November 2021
FirstPort Property Services Ltd v Settlers Court RTM Company and others heard 10th November 2021
Craig v Her Majesty’s Advocate (for the Government of the United States of America) and another heard 25th 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
Croydon London Borough Council v Kalonga, heard 12th January 2022
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
R v Maughan, heard 27th 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
R (on the application of Coughlan) v Minister for the Cabinet Office, heard 15th February 2022.  

This Week in the Supreme Court – week commencing 7th February 2022

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

On Tuesday 8th February, the Supreme Court will hear the case of DCM (Optical Holdings) Ltd v Commissioners for Her Majesty’s Revenue and Customs (Scotland). This will take place at 10:30am in Courtroom One, and the judgment being appealed is [2020] CSIH 60. The Court will consider whether tax assessments made by HMRC in 2005 were made out of time and therefore time barred, as well as whether HMRC have an implied power to refuse to accept a sum claimed by a taxpayer by way of input tax.

The following Supreme Court judgments remain outstanding: (As of 07/2/22)

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
Bott & Co Solicitors v Ryanair DAC, heard 20 May 2021
East of England Ambulance Service NHS Trust v Flowers and Ors, heard 22 June 2021
Basfar v Wong, heard 13th-14th October
Secretary of State for the Home Department v SC (Jamaica), heard 19th October
Commissioners for Her Majesty’s Revenue and Customs v Coal Staff Superannuation Scheme Trustees Ltd, heard 26th October
Harpur Trust v Brazel, heard 9th November 2021
FirstPort Property Services Ltd v Settlers Court RTM Company and others heard 10th November 2021
Craig v Her Majesty’s Advocate (for the Government of the United States of America) and another heard 25th November 2021
Bloomberg LP v ZXC heard 30th 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
Croydon London Borough Council v Kalonga, heard 12th January 2022
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
R v Maughan, heard 27th 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

New Judgment: Public Prosecutors Office of the Athens Court of Appeal v O’Connor [2022] UKSC 4

On Appeal from: [2017] NIQB 77

The Respondent was ordered to be extradited to Greece for the purposes of conducting a criminal prosecution against him. On that day, the Respondent’s solicitor stated orally in court that an appeal would be lodged against the extradition order, and on 16 December 2015, the notice of application for leave to appeal was filed with the Court. However, due to an oversight, the solicitor failed to serve the notice on the Crown Solicitor’s Office (on behalf of Greece) until about three weeks later.

Section 26(5) of the Extradition Act 2003 provides that where a person gives notice of application for leave to appeal against an extradition order after the end of the permitted period (which is seven days from the date of the relevant order), the High Court must not for that reason refuse to entertain the application if the person did “everything reasonably possible to ensure that the notice was given as soon as it could be given.”

The Divisional Court in England and Wales in Szegfu v Court of Pecs, Hungary [2015] EWHC 1764 (Admin) had indicated that the correct interpretation of section 26(5) permitted no distinction between the conduct of the person and the conduct of their legal representative. The Divisional Court in Northern Ireland disagreed. Thus the question the Supreme Court was asked to consider was whether section 26(5) should be interpreted to allow or exclude a distinction between the actions of a person and their legal representative.

 

Held – Appeal dismissed.

 

Section 26(1) of the Extradition Act 2003 identifies a “person” as being the person who is subject to an extradition order. In section 26(5), the word “person” appears twice. Lord Stephens finds that on both occurrences, “person” means the person subject to an extradition order, as set out in section 26(1). In the second occurrence of the word, the requirement of doing everything reasonably possible is imposed by the language of the provision only on “the person” and there is no evident reason to understand it as also being imposed on the individual’s agent or legal representative.

This interpretation is supported by considering the vice sought to be addressed by Parliament when inserting section 26(5) into the Extradition Act 2003. The vice was the potential for substantial injustice caused by the application of short and rigid time limits for those seeking to appeal against extradition orders, whether or not such persons had legal representation.

The surrogacy principle involves the imputation of the fault of a client’s legal representative to that client. However, the surrogacy principle is not universal. Lord Stephens finds that the surrogacy principle does not require an interpretation of section 26(5) consistent with the Divisional Court’s view in Szegfu.

Lord Stephens agrees with the Divisional Court in this case, in finding that the procedural unfairness of attributing the fault of the legal representative to the client may not be remedied in practice, because even if it is open to the client to sue his legal representative in negligence, that right will not be of little assistance in circumstances where the client has been extradited to a place where he is at risk of inhuman and degrading treatment.

 

For a PDF of the judgment, see: Judgment (PDF)

To view the judgment on BAILII, see: Judgment on BAILII (HTML version)

For the press summary, please see: Press summary (HTML version)

To view the hearing, please use the links below:

 

Watch hearing

13 Dec 2021
Morning session
Afternoon session

New Judgment: R (on the application of O (a minor, by her litigation friend AO)) (Appellant) v Secretary of State for the Home Department (Respondent) R (on the application of The Project for the Registration of Children as British Citizens) (Appellant) v Secretary of State for the Home Department (Respondent) [2022] UKSC 3

On appeal from: [2021] EWCA Civ 193

This appeal concerned whether subordinate legislation was ultra vires because it set the fee at which a child or young person could apply to be registered as a British citizen at a level which many young applicants have found to be unaffordable.

The first claimant, O, was born in the United Kingdom in July 2007, attends school and has never left the UK. She has Nigerian citizenship, and applied to be registered as a British citizen in 2017 but was unable to afford the full amount of the fee, which was £973 at that time. Because the full fee was not paid, the Secretary of State refused to process O’s application.

The Immigration Act 2014 empowers the Secretary of State to set the fees for applications to obtain British citizenship in subordinate legislation, having regard only to the matters listed in section 68(9) of the 2014 Act. Those matters include not only the cost of processing the application but also the benefits that are likely to accrue from obtaining British citizenship and the costs of exercising other functions in relation to immigration and nationality. The current level of the fee produces a substantial surplus, over the administrative cost of processing an application to be applied, to subsidise other parts of the immigration and nationality system.

The appellants challenged the level of the registration fee on the basis that the Secretary of State did not have the power to set the fee at a level which rendered nugatory the underlying statutory right to become a British citizen conferred by the 1981 Act.

 

Held- Appeal dismissed.

The court explained that the issue on this appeal is one of statutory interpretation: whether Parliament has authorised in primary legislation the imposition by subordinate legislation of the challenged fee.

Lord Hodge considered the appellants’ submissions. He noted that the appeal is not concerned with fundamental or constitutional common law rights, nor are any Convention rights under the Human Rights Act 1998 engaged. The special rules of construction that are applicable when the principle of legality is infringed or the constitutional right of access to the courts is intruded upon therefore do not apply. The appellants’ argument based on the constitutional right of access to the courts therefore had no application to the present case.

The appellants argued specific statutory rights are not to be cut down by subordinate legislation passed under the vires of a different Act, a rule identified in the case of R v Secretary of State for Social Security, Ex p Joint Council for the Welfare of Immigrants [1997] 1 WLR 275 (“JCWI”). The court explained that an earlier statute (“statute 1”) can be expressly or impliedly amended or repealed by Parliament enacting a later statute (“statute 2”), including by empowering the executive branch of government to make subordinate legislation which impinges upon and even removes rights conferred by statute 1. Where statute 2 authorises subordinate legislation, the court’s task is to ascertain the scope of the enabling power contained in statute 2. In doing so the court will take into account assumptions or presumptions such as the principle of legality. If the court concludes that statute 2 has empowered the executive to make subordinate legislation which has the effect of removing rights conferred by statute 1, the rule in JCWI identified by the appellants imposes no additional hurdle. And where the court is not dealing with an interference by statute with a common law constitutional right or with a statutory provision which declares such a fundamental or constitutional right, the normal rules of statutory interpretation apply.

Applying those principles, Lord Hodge concluded that, in the 2014 Act, Parliament authorised the subordinate legislation by which the Secretary of State has fixed the relevant application fee. The appropriateness of imposing the fee on children is a question of policy which is for political determination, and not a matter for the court.

Lady Arden agreed with Lord Hodge but explained that she considers there is a wider role in statutory interpretation for pre-legislative materials. Lady Arden observes that the constitutional reason Lord Hodge gives for the courts not using explanatory notes no longer applies insofar as explanatory notes are now often published by commercial publishers and appear online free of charge. Lady Arden also considers that there are occasions when pre-legislative material may go further than simply provide the background or context for the statutory provision in question. In appropriate circumstances such materials can also considerably help the judge better to perform his or her role of finding the intention of Parliament in any particular enactment, for example when such materials reveal that the language of the statute – perhaps thought to be clear on its face – is in fact ambiguous.

 

For a PDF of the Judgment, please see: Judgment (PDF)

To view the Judgment in your browser, please see: Judgment on BAILII (HTML version)

For the Press summary, please see: Press summary (HTML version)

If you would like to watch the hearing, please see below:

Watch hearing

23 June 2021   Morning session   Afternoon session

24 June 2021   Morning session

Case Comment: Lloyd v Google LLC [2021] UKSC 50

In this post, Kenny Henderson and Alex Askew of CMS comment on the Supreme Court’s decision in Lloyd v Google LLC [2021] UKSC 50, which concerned whether a representative data protection action seeking damages for loss of control of personal data could be brought on behalf of large numbers of unidentifiable class members.

On 10 November 2021, the Supreme Court reversed the decision of the Court of Appeal in Lloyd v Google LLC [2021] UKSC 50, and unanimously dismissed Lloyd’s representative action brought against Google. The Supreme Court confirmed that a claim for damages for the unlawful processing of data under the Data Protection Act 1998 (“DPA 1998”) can only be made if the data subject has suffered some form of material damage (such as financial loss) or mental distress. The damage could not be the unlawful processing itself. This avoids a floodgates situation, where data controllers could have faced opt-out class actions for breaches of data protection law where the claimant had suffered a “loss of control” of data but no actual loss.

The Supreme Court also found that, in order to advance such a claim, it would be necessary to assess the extent of the unlawful processing in each individual case and damages could not be sought on a “uniform per capita” basis, without proof of individual circumstances. However, in certain respects the judgment expands the circumstances in which the representative action device can be used. Claimants and litigation funders will continue to explore the use of the representative action mechanism, particularly in circumstances where the homogeneity of individual losses can be sufficiently demonstrated across the class.

Factual background

Mr Lloyd, a former director of Which?, brought a representative action against Google using the procedure set out in Civil Procedure Rule (“CPR”) 19.6. Mr Lloyd’s claim was funded by third-party litigation funder, Therium. The claim alleged that between August 2011 and February 2012, Google breached its duties as a data controller to over 4 million Apple iPhone users resident in England and Wales. Mr Lloyd claimed that Google used a browser cookie which could be activated on certain mobile phones without users’ knowledge or consent when they visited certain websites (described as the ‘Safari Workaround’). Google allegedly used the cookie to collect information about customers’ browser activity, which in turn enabled Google to distribute targeted advertising to those users, generating significant profits for the company.

Mr Lloyd relied on s 13(1) of the DPA 1998 in bringing his claim, which provides a right of compensation where an individual suffers damage or distress by reason of any contravention by a data controller of the DPA 1998.

The representative action procedure in CPR 19.6 allows an action to proceed on an “opt-out” basis, meaning that individual class members do not need to elect to join the claim.  Thus, this is a very powerful procedural group claim mechanism.  The class members and representative must share the “same interest” in the claim. If that test is satisfied, then the court will use its discretion in deciding whether a claim that meets the test should be permitted to proceed. A judgment will bind all class members unless the court orders otherwise.

Mr Lloyd argued that the “same interest” requirement was satisfied as all members of the class could claim damages for “loss of control” and no proof of any further damage or distress was required. Damages were framed on the basis of an equal, standard “tariff” award, without the need for the individual assessment of loss. Mr Lloyd put forward a figure of £750 in compensation for each individual, which could have resulted in an award of damages of up to £3 billion. Assessment of whether the claim was suitable for the representative action procedure was performed in the context of Mr Lloyd’s application for permission to serve the claim outside of the jurisdiction.

Decisions of the lower courts

In October 2018, the High Court refused permission to serve the claim form out of the jurisdiction, finding that:

Mr Lloyd had failed to identify any harm caused by the alleged breach, which was required in a claim for compensation under the DPA 1998. Compensation could not be awarded merely for the reason of the infringement itself and associated loss of control over the personal data.
Even if Mr Lloyd could establish the requisite level of harm, the “same interest” test was not met because the impact was not uniform across the class.
Regardless, in exercising his discretion, the Judge would have refused to allow the claim, taking into account a number of different factors (which included likely costs, the inability to identify class members and the fact that class members had not authorised the claim).

Mr Lloyd appealed the decision. On 2 October 2019, the Court of Appeal allowed the appeal in an unanimous judgment. The Court of Appeal found that damages were in principle capable of being awarded for loss of control of data and that claimants were not required to show pecuniary loss or distress. It was found that the High Court had applied the “same interest” test too stringently. The members of the class were all victim of the same alleged wrong, in the same circumstances and in the same period. As a factor in coming to that conclusion, the judges noted that it would be impossible to imagine that a defence could apply to one of the represented claimants that did not apply to all of them. As a result, all represented parties could be said to have the “same interest” and in this situation, damages could be reduced to the “lowest common denominator”. In exercising its discretion, the Court of Appeal saw no reason why each class member could not be identified, and considered it irrelevant that members of the class had not authorised the claim.

The Court of Appeal’s decision opened the door to large opt-out class actions for non-de-minimis data protection breaches without the need to show loss.

The Supreme Court decision

The Supreme Court was tasked with deciding three issues, namely:

Are damages recoverable under the DPA 1998 for loss of control of data, without needing to identify pecuniary loss or distress?
Did the members of the class satisfy the “same interest” test required for a representative action to proceed?
If the “same interest” test is satisfied, should the court exercise its discretion to disallow the representative action from proceeding?

In a unanimous judgment, the Supreme Court unanimously reversed the decision of the Court of Appeal.

The representative action process

Lord Leggatt gave the leading judgment and began by considering the history and scope of the representative action procedure under CPR 19.6, whilst briefly comparing it to other methods of collective redress:

GLOs: Lord Leggatt noted these can be an effective way of bringing individual claims together where there are common or related issues of fact or law. However, Lord Leggatt explained that as this is an “opt-in” regime GLOs often suffer from low participation rates. There is also a need to prove quantum of loss in each case, which may make GLOs impractical where individual losses are small.
Collective Proceedings Order (CPO) regime: Lord Leggatt highlighted ‘significant’ features of the regime, which allow competition claims to be brought in the Competition Appeal Tribunal on an opt-out basis.

Lord Leggatt observed that the representative action mechanism is a “flexible tool of convenience in the administration of justice” and that it should be “applied to the exigencies of modern life as occasion requires.”

As noted by Lord Leggatt, English courts have traditionally applied the “same interest” test rigorously, particularly in light of the Court of Appeal’s key ruling in Markt & Co v Knight Steamship [1910] 2 KB 1021. Professor Rachael Mulheron, a leading commentator on this topic, has described the Markt judgment in her 2004 book The Class Action in Common Law Legal Systems as requiring “class members to show that issues of fact and law were identical between them.” Given the natural reading of the requirement that there be the “same interest”, it is unsurprising that it has been applied restrictively. This can be contrasted with the commonality test in the CPO regime for competition damages claims. Under that regime, the language of the commonality test is broader, referring to the “same, similar or related issues of fact or law”.

The Supreme Court found that the “same interest” requirement should be interpreted purposively in light of the CPR overriding objective. Put differently, the CPR requires that the “same interest” test be revaluated in a different context to its historical origins. In its judgment, the Supreme Court noted:

The purpose of requiring the representative to have the “same interest” in the claim as the persons represented is to ensure that the representative can be relied on to conduct the litigation in a way which will effectively promote and protect the interests of all members of the represented class. That plainly is not possible where there is a conflict of interest between class members”.

On this point, the judgment states,

So long as advancing the case of class members affected by the issue would not prejudice the position of others, there is no reason in principle why all should not be represented by the same person.”

This is a re-evaluation of the “same interest” test, where the focus is on advancing the interests of class members and avoiding conflicts with less focus on class members and the representative having identical interests. The court should not consider whether the class members meet an abstract threshold of commonality; rather, the test is met by the absence of a conflict of interests (with the Supreme Court noting that the cases Markt and Emerald Supplies Limited v British Airways [2010] EWCA Civ. 1284 are examples of this conflict).

The Supreme Court also considered “cases where there are merely divergent interests”, i.e., where “an issue arises or may well arise in relation to the claims of (or against) some class members but not others.”  Divergent interests are not, “in principle”, a bar to the claim going ahead as a representative action with a single representative claimant. The judgment does not contain any guidance on the dividing line between same interests and diverging interests, but it states that if divergent interests were to present difficulties in meeting the “same interest” test or to render it “otherwise inappropriate” for a single representative to represent the entire class, then provided there was no conflict of interest, “any procedural objection could be overcome by bringing two (or more) representative claims, each with a separate representative claimant or defendant, and combining them in the same action.” Put differently, where there are challenges with meeting the “same interest” test, the court will be open to pragmatic case management solutions.

The judgment noted the following further features of representative actions:

No requirement of consent: There is no need for a member of the class to take any positive step to be bound by the result. Although the rule does not confer a right to opt out of the proceedings, a judge managing the case has the option to require the representative to “notify members of the class… and establish a simple procedure for option out of representation”.
Class definition: The adequacy of the definition is a matter which goes to the court’s discretion in deciding whether the claim should be allowed to continue, rather than being a precondition for the application of the rule. Nevertheless, it is plainly desirable that the class of persons should be clearly defined.
Liability for costs: Class members will not normally be liable to pay any legal costs incurred by the representative. However, that does not prevent the court from ordering a class member to pay or contribute to costs. Nevertheless, Lord Leggatt does point out that it is difficult to envisage circumstances in which that would be just where the class member did not authorise the costs. On the other hand, a commercial litigation funder in unsuccessful proceedings is likely to be ordered to pay the successful party’s costs (at least to the extent of the funding).

Mr Lloyd’s claim

Lord Leggatt saw no legitimate objection to a representative claim establishing whether Google was in breach of the DPA 1998 and by doing so, seeking a declaration that any class member who suffered damage by reason of the breach is entitled to compensation. The claims in this case clearly raise common issues and it is not suggested that there a conflict of interest among class members. It was confirmed that all class members would therefore be considered to have the same interest. However, Mr Lloyd’s claim did not merely seek a declaration on liability (a bifurcated approach, allowing persons to opt-in to subsequent claims seeking damages in reliance on the finding of liability).  Rather, Mr Lloyd brought a claim that sought damages, and this is where it foundered.

To avoid the need for individualised assessment of damages Mr Lloyd argued that damages could be claimed for each class member on a “uniform per capita” basis, by establishing that an individual was entitled to compensation for “loss of control” of data, without the need to prove financial loss or stress. Alternatively, Mr Lloyd argued that class members were entitled to “user damages” in the amount they could reasonably have charged for releasing Google from the duties it had breached.

Mr Lloyd contended the following in his claim for damages:

The word “damage” in s 13(1) of the DPA 1998 not only extends beyond material damage to include distress (which principle was established in Vidal-Hall v Google Inc [2016] QB 1003), but also includes non-trivial breaches of the DPA 1998, namely for “loss of control” of data.
The principles in the case Gulati v MGN [2015] EWHC 1482 (CH), which were applicable to the assessment of damages in the tort of misuse of private information should also apply to s 13(1) of the DPA 1998, as both claims have a “common source” (in seeking to protect the right to privacy guaranteed by Article 8 of the ECHR). Gulati established that claimants could be compensated for misuse of their private information itself because they were deprived of “their right to control [its] use”.

Lord Leggatt rejected these arguments.  In respect of Mr Lloyd’s first argument, the Supreme Court found that it is not enough to simply prove a breach in order to recover compensation under s 13 of the DPA 1998. On a proper interpretation, the term “damage” in s 13 refers to material damage (such as financial loss) or mental distress. This damage must be distinct from, and caused by, unlawful processing of personal data in contravention of the DPA 1998. It cannot be the unlawful processing itself. This conclusion also precluded a claim for “user damages” based on a reasonable release fee for contravention of the right.  The claimant’s “common source” argument also failed, as the Supreme Court found there were significant differences in the scope of the common law tort of misuse of private information and data protection legislation (including the fact that the data protection legislation applied to all “personal data”, with no requirement that the date be of a confidential or private nature, or that there is a reasonable expectation of privacy).

Thus, as a matter of substantive law, damages are not available under s13(1) of the DPA 1998.

Assessing damages

The Supreme Court confirmed that even if Mr Lloyd could pursue a claim for damages based on “loss of control”, his proposed lowest common denominator approach could not be used as it would still be necessary to establish the extent of the unlawful processing in each individual case to ensure that a “de minimis” threshold was met. Google also objected to the lowest common denominator approach, noting that Mr Lloyd did not have authority from class members to waive parts of their damages claims. The Supreme Court opted not to decide this issue, but stated:

We are prepared to assume… that as a matter of discretion the court could – if satisfied that the persons represented would not be prejudiced and with suitable arrangements in place enabling them to opt out of the proceedings if they chose – allow a representative claim to be pursued for only a part of the compensation that could potentially be claimed by any given individual.”

As a result, Lord Leggatt took the view that, even if the legal foundation for the claim made was sound, he should exercise his discretion conferred by CPR 19.6(2) and refuse to allow the claim to continue. The Court ultimately allowed the appeal and restored the order made by the High Court refusing the claimant’s application for permission to serve outside the jurisdiction.

Comment

The Court of Appeal decision prompted several large claims to be filed, each on behalf of millions of people. The ability to bring representative actions for “loss of control” of data posed a risk to a huge number of businesses across a range of sectors and to public sector bodies. That risk has reduced significantly following the Supreme Court’s ruling.

That said, this is not the end of the representative action mechanism. The judgment has broadened the “same interest” test by endorsing a more flexible approach.   The judgment also confirms that the mechanism can be used to award damages. But that brings challenges; the Court noted that what “limits the scope for claiming damages in representative proceedings is the compensatory principle on which damages for a civil wrong are awarded.”  Significantly, the judgment stated that “there is no reason why damages or other monetary remedies cannot be claimed in a representative action if the elements can be calculated on a basis that is common to all members of the class.”  This means the representative must put forward a class definition and methodology that enables assessment of losses on a compensatory basis. Mr Lloyd was unable to meet this test in the circumstances of his claim, but other claims will attempt to meet this test.

The Court has also indicated that, where the “same interest” test is met, the factors that bear on the court’s discretion as to whether to allow a claim to proceed as a representative action are “likely to militate in favour of allowing a claim, where practicable, to be continued as a representative action”. Together with the Supreme Court’s decision in Merricks v Mastercard [2020] UKSC 51 – which held that the “suitability” requirement for a CPO imposes a low-bar test for whether a collective action would be more appropriate than a collection of individual claims – we now have a clear indication that English courts will be slow to exercise their discretion to preclude opt-out class actions going ahead where they fall within the terms of the relevant procedural mechanism.

Lloyd v Google has been decided against a backdrop of increasing interest from the UK government in introducing further mechanisms for opt-out class actions. The Department for Business, Energy & Industrial Strategy ran (closed October 2021) a consultation titled “Reforming competition and consumer policy” which proposed a new class action device for consumers. The government has yet to state whether it intends to implement such a device. While the Supreme Court judgment avoids the spectre of opt-out class actions for “loss of control” for claims under the DPA 1998 it broadens class action risk in other areas.

 

CMS acted for the 3rd Intervener.

 

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