New Judgment: Croydon London Borough Council v Kalonga [2022] UKSC 7

On appeal from [2021] EWCA Civ 77

The Appellant, a local housing authority, granted the Respondent a fixed-term secure tenancy of five years. During the tenancy, the Appellant served the Respondent with notice that they intended to seek possession of the Property on the grounds of rent arrears and anti-social behaviour.

There are two issues in the appeal. The first is whether the Appellant was able to seek possession in those circumstances or whether they were prevented from doing so in light of the statutory protections for secure tenancies under the Housing Act 1985 (as they apply to fixed-term tenancies granted by public sector landlords). That issue turned on the proper construction of the statutory regime governing secure tenancies, now to be found in Part IV (sections 79 and following) of the 1985 Act. The second issue is whether the tenancy agreement contained a forfeiture clause, under which the Appellant could terminate the lease because of some fault on the part of the Respondent.

Both the High Court and the Court of Appeal found in favour of the Respondent. The Court of Appeal held that the only way to bring a secure fixed–term tenancy to an end under the 1985 Act during the period of the fixed–term was by the exercise of a forfeiture clause to obtain a termination order in lieu of forfeiture pursuant to section 82(3) of the 1985 Act. The Appellant had not purported to rely upon forfeiture in seeking to terminate the fixed–term tenancy and the Court of Appeal held that her tenancy agreement did not, in any event, contain a forfeiture clause. As a result, the Appellant could not terminate the fixed–term tenancy prior to the end of the five years. The decision was then appealed to the Supreme Court.

 

Held – Appeal unanimously allowed in part.

 

The construction of the relevant provisions of the 1985 Act advanced by the parties and by the courts below all gave rise to significant difficulties. The provisions had to be interpreted so as to accommodate all situations. Both party’s interpretations of the Act would give rise to unsatisfactory results in certain circumstances.

A different solution was therefore required. In order to reach this solution, the critical question was whether Parliament intended via the security of tenure provisions of the 1985 Act to grant greater protections to social housing tenants compared with the contractual and proprietary rights under their tenancy agreements or to replace and to some extent reduce or remove them.

A fixed–term tenancy confers substantial security of tenure. Legislation to improve tenants’ rights should not be construed lightly as taking that away. The 1985 Act did not demonstrate that Parliament intended the possession regime to apply to all fixed–term secure tenancies. Those without provisions for early termination were immune until the end of the fixed–term. Parliament could not be taken as intending to expose a tenant to a loss of contractual security of tenure earlier than the landlord could have obtained possession under the terms of the tenancy.

The key to reaching this conclusion was attention to the words of section 82(1) and, in particular, reading “subject to termination by the landlord” with “cannot be brought to an end by the landlord except…” in section 82(1) of the 1985 Act. The latter phrase assumed that a fixed–term tenancy could be brought to an end by the landlord in accordance with the terms of the tenancy agreement. Without a provision for earlier termination however, an unexpired fixed–term created a bar to termination. A fixed-term tenancy without a forfeiture or break clause could not be terminated until the fixed–term expired by effluxion of time. A fixed–term tenancy with a forfeiture clause however could not be terminated otherwise than by termination in lieu of forfeiture under section 82(3) of the 1985 Act. In short, a landlord is able to seek possession against a tenant with a secure fixed–term tenancy where there is a presently exercisable break or forfeiture clause. That approach prevents the tenant being deprived of their contractual and proprietary rights but also means that the landlord may rely upon a contractual right to terminate or forfeit where it has been granted one under the tenancy agreement where such a right has actually become exercisable.

The Court’s conclusion in relation to issue one was fatal to the Appellant’s case because, regardless of whether the tenancy agreement contained a forfeiture clause, they had not sought to rely upon it. Lord Briggs nevertheless went on to decide the second issue. Whether a particular clause amounted to a forfeiture clause was a matter of substance, not form, and a landlord would not be permitted to dress up a forfeiture clause as something else to avoid relief from forfeiture being available to the tenant. The tenancy agreement permitted the landlord to seek an order for possession from the Court “at any time” if the tenant breached the terms of the agreement. That was a forfeiture clause applying the established test derived from Clays Lane Housing Co-operative Ltd v Patrick [1985] 17 HLR 188 and the Courts below had been wrong to conclude otherwise.

The cumulative result was that the Respondent’s tenancy agreement contained numerous provisions granting the Appellant the right to bring the secure fixed–term tenancy to an early end. Some of those were forfeiture provisions and some merely break clauses. The Judge was therefore right to dismiss the claim in circumstances where the Appellant had not sought termination in lieu of forfeiture but her declarations were only partially correct because the tenancy agreement did contain a forfeiture clause. That meant that the appeal succeeded in part.

Judgment (PDF)

Judgment on BAILII (HTML version)

Press summary (HTML version)

Watch hearing

12 Jan 2022
Morning session
Afternoon session

This Week in the Supreme Court – w/c 7th March 2022

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

On Wednesday 9th March judgment will be handed down in Croydon London Borough Council  v Kalonga, on appeal from [2021] EWCA Civ 77. The judgment will have the citation [2022] UKSC 7 and will be handed down at 09:45. The Court were asked whether a landlord can terminate a flexible tenancy agreement prior to the expiry of the fixed term if the tenancy agreement does not expressly provide for re-entry or forfeiture.

On Friday 11 March the Supreme Court will hear an assessment of costs hearing in Secretary of State for Health and another v Servier Laboratories Ltd and others, on appeal from [2019] EWCA Civ 1096. In this case the court will consider to what extent, if at all, are factual findings made by the General Court of the European Union in the course of its judgment in Case T-691/14 Servier SAS v EU Commission annulling a competition infringement decision of the European Commission binding as res judicata on English courts in a follow-on private damages action brought by the Respondents against the Appellants.

The following Supreme Court judgments remain outstanding: (As of 09/03/22)

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
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
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
AIC Ltd v Federal Airports Authority of Nigeria, heard 1st March 2022
Candey Ltd v Crumpler and another (as Joint Liquidators of Peak Hotels and Resorts Ltd (In Liquidation), heard 2nd March 2022

 

This Week in the Supreme Court – w/c 28th February 2022

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

On Tuesday 1st March the Supreme Court will hear the case of AIC Ltd v Federal Airports Authority of Nigeria, on appeal from [2020] EWCA Civ 1585. The court will consider several issues: A. Whether the execution of the Court of Appeal’s judgment and order should be stayed pending the resolution of this application for permission to appeal and, if permission is granted, pending the appeal. B. In the proposed appeal: (i) What is the correct approach to an application to reconsider an order after it has been made, but before it has been sealed, (ii) Whether the Court of Appeal erred by interfering in the judge’s exercise of her discretion in relation to the jurisdiction to reconsider an order, and (iii) Whether FAAN, the applicant seeking reconsideration of the order, required relief from sanctions under the Civil Procedure Rules in circumstances where the relevant order only permitted AIC to apply for enforcement of the arbitral award rather than to enforce it straight away if FAAN failed to comply with the order.

On Wednesday 2nd March the Supreme Court will hear the case of Candey Ltd v Crumpler and another (as Joint Liquidators of Peak Hotels and Resorts Ltd (In Liquidation)), on appeal from [2020] EWCA Civ 26. The Court will consider the following issue: What action must a solicitor take when entering into an additional security arrangement with a client to avoid waiving its rights under a pre-existing equitable lien (or creating an inference of waiver)?

 

The following Supreme Court judgments remain outstanding: (As of 02/03/22)

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
AIC Ltd v Federal Airports Authority of Nigeria, heard 1st March 2022
Candey Ltd v Crumpler and another (as Joint Liquidators of Peak Hotels and Resorts Ltd (In Liquidation), heard 2nd March 2022

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

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