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.

 

This Week in the Supreme Court – w/c 31st January 2022

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

On Tuesday 1st February until Thursday 3rd February, the Supreme Court will hear three different but linked cases at 10:30am:

Cornerstone Telecommunications Infrastructure Ltd v Compton Beauchamp Estates Ltd, on appeal from [2019] EWCA Civ 1755. The Court will consider whether the Upper Tribunal has the jurisdiction to confer rights on a claimant under the Electronic Communications Code in relation to a particular sight where a third party is in occupation of that site.
Cornerstone Telecommunications Infrastructure Ltd v Ashloch Ltd and another, on appeal from [2021] EWCA Civ 90. The facts and issues differ from the above case inly insofar as the Court will be asked to consider if the Upper Tribunal can refer those rights to an operator, who has a Landlord and Tenant Act 1954 protected tenancy.
On Tower UK Ltd (formerly known as Arqiva Services Ltd) v AP Wireless II (UK) Ltd, on appeal from [2020] UKUT 0195 (LC). Again linked to the facts of the above cases, but in this appeal the Court will consider the meaning of paragraphs 20 and 27 of the Electronic Communications Code as set out in Schedule 3A to the Communications Act 2003.

On Wednesday 2nd February, the UKSC will hand down judgment in R (on the application of O (a minor, by her litigation friend AO)) v Secretary of State for the Home Department, and R (on the application of The Project for the Registration of Children as British Citizens) v Secretary of State for the Home Department) (Expedited). The Court will decide whether the Secretary of State can lawfully make the exercise of a child’s right to be registered as a British citizen conditional on their payment of £1,012. The judgment will have the citation [2022] UKSC 3.

A full list of the cases scheduled for the Hillary Term can be found here.

The following Supreme Court judgments remain outstanding: (As of 28/1/22)

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
Public Prosecutors Office of the Athens Court of Appeal v O’Connor (Northern Ireland) heard 13th 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

New Judgment: Pwr v Director of Public Prosecutions, Akdogan and another v Director of Public Prosecutions [2022] UKSC 2

On appeal from: [2020] EWHC 798

This was a joint appeal arising from the same set of facts, in which the court was asked to decide whether s13(1) of the Terrorism Act 2000 constituted a specific offence, and if so, whether it was compatible with Article 10 of the European Convention on Human Rights.

Section 13(1) provides that it is a criminal offence for a person in a public place to carry or display an article “in such a way or in such circumstances as to arouse reasonable suspicion that he is a member or supporter of a proscribed organisation”.

The appellants took part in a demonstration against the perceived actions of the Turkish state in north-eastern Syria. Each carried a flag of the Kurdistan Workers Party (“the PKK”), an organisation which is proscribed under the 2000 Act. The appellants were each convicted in Westminster Magistrates’ Court of a section 13(1) offence. The Crown Court dismissed their appeals, holding that section 13(1) created an offence of strict liability meaning that the offence did not require a person to have any knowledge of the import of the article that he or she was wearing, carrying or displaying, or of its capacity to arouse reasonable suspicion that he or she was a member or supporter of a proscribed organisation. The Crown Court also held that section 13(1) was not incompatible with the right to freedom of expression under article 10 of the European Convention on Human Rights.

 

Held- Appeal dismissed.

 

Strict liability

Section 13(1) is a strict liability offence. A limited mental element is required under section 13(1) in that the defendant must know that he or she is wearing or carrying or displaying the relevant article. However, there is no extra mental element required over and above this.

There is a strong presumption that criminal offences require mens rea. In this case, the presumption is rebutted by necessary implication. First, the words arousing “reasonable suspicion” impose an objective standard and indicate that there is no requirement of mens rea. Second, to interpret section 13(1) as requiring mens rea would render incoherent what can otherwise be viewed as a calibrated and rational scheme of proscribed organisation offences in the 2000 Act. Third, a strict liability interpretation of the offence in section 13(1) is supported by the purpose (or mischief or policy) behind the offence, which is concerned with the effect on other people rather than the intention or knowledge of the defendant.

 

Compatibility with article 10 of the Convention

The offence under section 13(1) is compatible with article 10. Section 13 is an interference for the purposes of article 10(1). However, that interference is justified. First, the restriction is prescribed by law, in that section 13(1) is expressed in clear terms which provide legal certainty. Second, the restriction pursues legitimate aims, in that it is necessary in the interests of national security, public safety, the prevention of disorder and crime and the protection of the rights of others. Third, the restriction is necessary in a democratic society and proportionate to the legitimate aims pursued. Even taking into account the European Court of Human Rights’ (“ECtHR”) jurisprudence that, under article 10, necessity is not to be lightly found, section 13 strikes a fair balance between the right to freedom of expression and the need to protect society by preventing terrorism. In particular, the offence is circumscribed by the requirement for reasonable suspicion and the sanctions are comparatively minor. The Supreme Court rejects the appellants’ submission that the ECtHR considers that expressive acts can only be criminalised where the expression includes an incitement to violence.

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

18 Nov 2021
Morning session
Afternoon session

The Week in the Supreme Court – week commencing 24th January 2022

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

On Tuesday 25th January, the Court will hear Commissioners for Her Majesty’s Revenue and Customs v NCL Investments Ltd and another, on appeal from 2020 EWCA Civ 663. This case will consider accounting debits relating to the grant of share options to employees, and whether they are a deductible expense for corporation tax purposes. This will be heard at 10:30am in Courtroom One.

On Wednesday 26th January, the Court will hand down judgment in two joined cases; PWR v DPP and Akdogan and another (AP) v DPP. The Court will decide whether s13(1) of the Terrorism Act 2000 creates a strict liability offence, and if so, whether it is compatible with Article 10 of the ECHR. This judgment will have the citation [2022] UKSC 2, and was first heard on the 18th November 2021.

On Thursday 27th January, the Court will hear the case of R v Maughan. In this Northern Irish Case, the Court will be asked to decide whether the term “proceedings” should be confined to court proceedings in the context of considering reductions to defendants’ sentences when they plead guilty to a crime at an early stage, and whether those caught ‘red-handed’ should have these reductions reduced. The Judgment appealed is 2019 NICA 66; 2020 NICA 19, and the hearing will take place at 10:30am in Courtroom One.

A full list of the cases scheduled for the Hillary Term can be found here.

The following Supreme Court judgments remain outstanding: (As of 28/1/22)

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
R (on the application of O (a minor, by her litigation friend AO)) v Secretary of State for the Home Department and R (on the application of The Project for the Registration of Children as British Citizens) v Secretary of State for the Home Department) (Expedited), heard 23 and 24 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
Public Prosecutors Office of the Athens Court of Appeal v O’Connor (Northern Ireland) heard 13th 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

 

This Week In the Supreme Court – w/c 17th January 2022

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

On Wednesday 19th January, the court will hear the case of Stanford International Bank Ltd (in liquidation) v HSBC Bank PLC. This is an appeal from [2021] EWCA Civ 535, and the Supreme Court will consider whether an insolvent company can suffer any loss if payments are made out of its bank accounts which discharge a debt owed by that company in an equivalent amount. The hearing will take place from 10:30 in Courtroom One.

A full list of the cases scheduled for the Hillary Term can be found here.

The following Supreme Court judgments remain outstanding: 

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
R (on the application of O (a minor, by her litigation friend AO)) v Secretary of State for the Home Department and R (on the application of The Project for the Registration of Children as British Citizens) v Secretary of State for the Home Department) (Expedited), heard 23 and 24 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
PWR (AP) v Director of Public Prosecutions and Akdogan and another (AP) v Director of Public Prosecutions heard 18th 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
Public Prosecutors Office of the Athens Court of Appeal v O’Connor (Northern Ireland) heard 13th 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

Case Comment: FS Cairo (Nile Plaza) LLC v Brownlie [2021] UKSC 45

In this post, Maxie Chopard, a trainee solicitor at CMS, comments on FS Cairo (Nile Plaza) LLC v Brownlie [2021] UKSC 45, an important judgment providing guidance on the rules governing service out of the jurisdiction.

On 20 October 2021, the Supreme Court delivered its judgment in FS Cairo (Nile Plaza) LLC v Brownlie [2021] UKSC 45. The two issues on appeal were:

(i) whether Lady Brownlie’s claims in tort passed through the gateway in paragraph 3.1(9)(a), CPR Practice Direction 6B (the “tort gateway”), in that “damage was sustained…within the jurisdiction” so as to allow service to be effected on FS Cairo, a foreign defendant (the “tort gateway question”); and
(ii) whether Lady Brownlie could rely on English law or must adduce evidence of Egyptian law in showing that her claims (both in contract and in tort) had a reasonable prospect of success (the “foreign law question”).

FS Cairo’s appeal was dismissed by a 4-1 majority on the tort gateway question with Lord Lloyd-Jones delivering the leading judgment. The Supreme Court unanimously dismissed the appeal on the foreign law question, for reasons set out in the judgment of Lord Leggatt.

Background

In 2010, Sir Ian Brownlie QC and his wife, Lady Brownlie, stayed at the Four Seasons Hotel Cairo while on holiday in Egypt. Lady Brownlie hired a chauffeur-driven car through the hotel, which was operated by FS Cairo. A serious road traffic accident occurred in which Sir Ian Brownlie QC and his daughter were killed. Lady Brownlie and the remaining passengers suffered serious injuries.

In 2012, Lady Brownlie brought claims in contract and tort against Four Seasons Holdings Incorporated (“FS Holdings”), a Canadian company, in the High Court, seeking damages: (i) for personal injury in her own right; (ii) in her capacity as executrix of the estate of her late husband for wrongful death; and (iii) for bereavement and loss of dependency in her capacity as her late husband’s widow. She was granted permission to serve the proceedings out of the jurisdiction in 2013. FS Holdings challenged the English courts’ jurisdiction.

In 2018, the Supreme Court found that the English courts had no jurisdiction to try the claims against FS Holdings as it was a non-trading holding company that did not own or operate the hotel (“Brownlie 1”).

Lady Brownlie was subsequently allowed to substitute FS Cairo as the defendant. As FS Cairo is an Egyptian company, she once again required permission for service out of the jurisdiction. To this end, Lady Brownlie had to show in respect of each claim that:

(i) it falls within a jurisdictional gateway under Practice Direction 6B;
(ii) it is a claim that has a reasonable prospect of success; and
(iii) England is the proper place in which to bring the claim (forum non conveniens).

The High Court declared that the court had jurisdiction to try Lady Brownlie’s claims in contract and in tort. FS Cairo appealed against this decision on two grounds: (i) that Lady Brownlie’s claim did not fall within the tort gateway; and (ii) that she had not shown that her claims in tort and contract had a reasonable prospect of success. The Court of Appeal (Lord Justice McCombe, Lord Justice Underhill and Lord Justice Arnold) affirmed this decision by a majority, with Lord Justice Arnold dissenting on both grounds.

The Tort Gateway Question

Majority Opinion

In the Supreme Court Lord Lloyd-Jones favoured a broad reading of “damage” as referring to actionable harm, direct or indirect, caused by the wrongful act alleged. This interpretation reflected the ordinary and natural meaning of the word and was in accordance with the purpose of the tort gateway. He held that all three heads of claim related to actionable harm suffered in the jurisdiction as a result of the wrongful acts alleged, and therefore passed through the tort gateway.

Lord Lloyd-Jones also did not think that this wide interpretation of “damage” would give all claimants in personal injury cases a right to bring proceedings in the jurisdiction of their residence. Claims which did not have their closest connection with England and Wales would not be accepted. The jurisdictional gateways formed only one element of the test; it must also be shown that this is the proper place in which to bring the claim. Further, the courts’ structured and predictable exercise of discretion under forum non conveniens would prevent the acceptance of jurisdiction where there was merely a “casual or adventitious link” between the claim and this jurisdiction.

Finally, Lord Lloyd-Jones found that it was not necessary or appropriate to limit the tort gateway by a restrictive reading or by attempting to distinguish between direct and indirect damage. The line of authority for economic tort cases in which it was held that “damage” was not the place where financial losses were suffered should be distinguished from personal injury cases.

Dissenting judgment

On the other hand, Lord Leggatt favoured a narrow interpretation of “damage” as direct damage, in line with the approach adopted in cases involving economic torts. He disagreed that “damage” as a matter of ordinary language meant all physical, psychological or economic harm which the claimant sustains in England and Wales. In personal injury cases, the place where the damage was sustained would be where the accident took place. Dismissing the appeal on this ground, he held that Egypt was the place where all the damage falling within the scope of the tort gateway was sustained.

Lord Leggatt was firmly of the view that the English courts should interpret the tort gateway in a manner that gives effect to its purpose of requiring a real and substantial connection with the jurisdiction. He cautioned that if the broad interpretation advocated by the majority was correct, a claimant could create a link with the jurisdiction which satisfied the gateway requirement for suing a foreign defendant in the English courts by travelling to England, for example for medical treatment, after the event giving rise to the damage has occurred.

He was also critical of using judicial discretion exercised under forum non conveniens to rein in the wide jurisdiction accorded by the tort gateway. The two limbs of the jurisdictional test were distinct. The jurisdiction gateways were aimed at establishing a sufficient connection with the jurisdiction as a prerequisite to permitting a foreign defendant to be sued in England and Wales. At the forum non conveniens stage, the considerations were whether it would be just or legitimate for the English courts to assert jurisdiction over the defendant.

The Foreign Law Question

Lord Leggatt clarified that there was no scope for applying English law by default given that Lady Brownlie’s amended claim form and particulars of claim were claims for damages “pursuant to Egyptian law”. English law could only be applied based on the presumption that the content of the applicable foreign law is materially similar to the English law on the matters in question (the “presumption”).

The presumption was justified by: (i) similarities among different systems of law; (ii) the requirement of materiality i.e. unless there is a real likelihood that any differences between the applicable foreign law and English law on a particular issue may lead to a different outcome, there is no good reason to put a party to the trouble and expense of adducing evidence of foreign law; and (iii) that the presumption does not determine any legal issue but only operates unless and until evidence of foreign law is adduced.

Lord Leggatt therefore found that Lady Brownlie could rely on the presumption to show that her pleaded claims had a real prospect of success. While the precise nature and extent of the obligations owed would differ from one legal system to another, it was reasonable to presume that under any system of law a hotel operator who entered into a contract with a guest for an excursion in a chauffeur-driven car provided by the hotel would owe contractual or tortious obligations to ensure the safety of its guests.

Nonetheless, Lord Leggatt agreed with the Court of Appeal that Lady Brownlie should serve revised particulars of claim detailing her case under Egyptian law going forward. Parties were entitled to rely on the presumption but this did not alter the ordinary rules of pleading. FS Cairo was entitled to know the case against it, including whether Lady Brownlie would address gaps in her evidence of foreign law or if she would continue to rely solely upon the presumption.

Comment

The Supreme Court followed the approach taken in other common law jurisdictions to adopt a wide interpretation of “damage” encompassing the continuing physical, psychological and economic harm beyond the immediate effects of personal injury suffered overseas. The definition of “damage” side-steps difficult issues such as where to draw the line between direct and indirect damage and distinguishing between various types of harm. Clarity on the legal position in this jurisdiction is welcome for English claimants, who may also benefit from the increased latitude of the courts in exercising discretion on whether England is the proper place to bring the claim.

On the foreign law question, the Supreme Court’s decision is a practical approach from a case management perspective. In the early stages of proceedings, the presumption offers parties an option to manage the costs of adducing expert evidence on foreign law, particularly when the substantive issues are a matter for trial.

Case Comment: Alize 1954 and Anor v Allianz Elementar Versicherungs AG and Ors [2021] UKSC 51

In this post, Eleanor Lane, Nicholas Carroll, and Robyn Connolly of CMS comment on the UK Supreme Court’s decision in Alize 1954 and Anor v Allianz Elementar Versicherungs AG and Ors [2021] UKSC 51, which delivered further guidance on the seaworthiness obligations under the Hague Rules.

On 10 November 2021 the Supreme Court unanimously dismissed the appeal in Alize 1954 and Anor v Allianz Elementar Versicherungs AG and Ors [2021] UKSC 51.

The judgment clarifies the seaworthiness obligations under the Hague Rules, making it clear that uncorrected charts and defective passage plans are each an “attribute of the vessel” which will render a vessel unseaworthy.

This case will be of particular interest to vessel owners and carriers / shippers of cargo.

The factual background

On 18 May 2011 the container vessel CMA CGM LIBRA was leaving the port of Xiamen in China en route to Hong Kong laden with cargo.

A Notice to Mariners on board the vessel indicated that, outwith the fairway, the chart was unreliable but this information was not noted by the crew on the vessel’s chart nor was it included in the passage plan.

The passage plan indicated that the vessel would remain within the buoyed fairway but the master (in a decision which the Admiralty judge found to be negligent) decided otherwise and the vessel ended up grounded on a shoal to the west of the fairway. The grounding resulted in salvage costs of US $9.5 million and the owners made a claim against the cargo owners in general average totalling US $13 million.

A small minority of cargo owners refused to pay on the grounds that a shipowner is not entitled to recover general average where the loss was caused by its own actionable fault – essentially that by having a defective passage plan the owners were in breach of their obligation under Article III Rule 1 of the Hague Rules to exercise due diligence to make the ship seaworthy. The ship’s owners argued that a defective passage plan does not render a vessel unseaworthy and that, under the Hague Rules, shipowners are not liable for negligent navigational decisions. They also argued that they had exercised due diligence to make the vessel seaworthy by employing a competent crew and equipping the vessel with all necessary equipment including up to date charts and Notices to Mariners.

At first instance the Admiralty judge, Teare J held that the vessel was unseaworthy prior to the voyage taking place due to the defective passage plan, saying “It seems to me inconceivable that the prudent owner would allow the vessel to depart from Xiamen with a passage plan which was defective in the manner… found”. The judge concluded that the ship’s owners were responsible for all acts of the crew while passage planning and that the failure of the master and second officer to exercise reasonable skill and care in preparing the passage plan was accordingly the fault of the owners.

The Court of Appeal, three judges with considerable experience in shipping, upheld Teare J’s decision.

Permission to appeal to the Supreme Court was granted on two grounds:

Firstly, that the judge was wrong in holding that the defective passage plan rendered the vessel “unseaworthy” for the purposes of Article III Rule 1 of the Hague Rules.

Secondly, that by equipping the vessel with a competent master and crew and by making available all necessary information to permit safe navigation, the carrier had discharged its duty to exercise due diligence to make the vessel seaworthy.

The judgment comprehensively addresses both of these issues.

Issue 1 – Did the defective passage plan render the vessel unseaworthy for the purposes of Article III Rule 1 of the Hague Rules?

Article III Rule 1 of the Hague Rules places an obligation on a carrier to make the ship seaworthy and to properly man, equip and supply the ship. Article IV contains a number of exceptions which include “any act, neglect or default of the master…” in the navigation of the ship.

The owners argued that the Hague Rules distinguish between the “navigable state” of a vessel and the navigation of that vessel by the master and crew. The defect in the passage plan was (according to the owners) an error of navigation and was therefore not an “attribute of the vessel” which rendered the vessel unseaworthy.

The usual test of seaworthiness is whether a prudent owner would have required a defect (had he known of it) to be made good before letting a ship go to sea. The Supreme Court, finding that theAarticle IV exceptions cannot be relied on where a carrier / owner is in breach of its obligation to use due diligence to render a vessel seaworthy, agreed with Teare J that a prudent owner would not have allowed a vessel to depart with such a defective passage plan. This meant that the vessel was unseaworthy before the voyage ever started and the owners had accordingly failed to exercise due diligence to make the vessel seaworthy.

Issue 2 – Did the failure of the master and second officer to exercise reasonable skill and care when preparing the passage plan constitute want of due diligence on the part of the carrier for the purposes of Article III Rule 2 of the Hague Rules?

Article III Rule 2 provides that, subject to the Article IV exceptions noted above, “the carrier shall properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods carried”.

The owners sought to rely on the exception in Article IV Rule 2(a), arguing the acts of the master and second officer which led to the grounding were those of negligent navigation. They stated that the crew had been equipped with everything necessary for safe navigation of the vessel by a competent crew; the defective passage plan was caused by the crew’s failure to annotate the plan and not by the carrier’s lack of due diligence.

The Supreme Court noted that the vessel was at all material times within the owners’ orbit and that, although there are limits to a carrier’s responsibility, a carrier cannot escape its responsibilities simply by delegating them to servants or agents. The failure to exercise diligence was not done by a third party unconnected to the owner / carrier, such as a shipbuilder or a previous handler of cargo, and/or in circumstances which were not reasonably discoverable by the exercise of due diligence.

In this situation, the vessel was at all times under the carrier’s control and the failure to exercise due diligence was a failure of the servants of the carrier. Even though navigation is the responsibility of the master, involving specialist knowledge and judgement of the master and crew, the carrier remains responsible for any lack of diligence in the performance of that task. If the incident had occurred as a result of poor navigation during the voyage, the nautical fault exception could potentially have been relied upon – but where the errors in passage planning occur at the appraisal or planning stage and mean that the vessel is unseaworthy before a voyage ever starts, the carrier will be liable.

Comment

The judgment significantly clarifies the extent of a shipowner’s / carrier’s obligation to render a vessel seaworthy and at what point this will begin to apply – defining the concept of seaworthiness as illustrative rather than prescriptive.

The judgment further confirms that in most cases the “prudent owner” test – being the test of whether a prudent owner would (had he known of it) have required a defect to be made good before putting a vessel to sea – is an appropriate test of seaworthiness.

The obligation to render a vessel seaworthy extends to everything which a prudent owner would require to be in place to ensure safe passage prior to setting sail. Amongst other things, this means that setting sail without a passage plan or with a defective passage plan will render a vessel unseaworthy.

New Judgment: FirstPort Property Services Ltd v Settlers Court RTM Company and others [2022] USKC 1

On appeal from [2019] UKUT 243

Settlers Court is a block of flats on the Virginia Quay Estate in East London (the “Estate“). The flats in Settlers Court are held under long leaseholds. The lessees under such long leaseholds are granted the “right to manage” by the Commonhold and Leasehold Reform Act 2002. The right to manage permits them to take over management of the block of which their flats form part from the existing manager via a single purpose company, the Respondent. The Respondent, formed by the lessees of the flats in Settlers Court, obtained the right to manage in respect of Settlers Court on 8 November 2014.

The Estate contains other blocks of flats beyond Settlers Court. These other blocks share facilities and amenities with Settlers Court. Prior to the lessees of Settlers Court exercising the right to manage, the service of managing the Estate Facilities was provided by the Appellant for the benefit of the entire Estate. The Appellant was entitled to levy charges from the lessees on the Estate in respect of providing the Estate Services.

The Respondents claimed that the statutory right to manage extends beyond Settlers Court so as to include the Estate Facilities, and that consequently they were now responsible for providing the Estate Services to the lessees of Settlers Court and the Appellant was no longer entitled to levy the Estate Charges from them.

The Appellant disputed this, maintaining that it remained exclusively responsible for providing the Estate Services to the entire Estate because the right to manage does not extend beyond the block over which it is exercised.

The Appellant therefore applied to the First-tier Tribunal to determine whether it was entitled to levy Estate Charges from the lessees of the flats in Settlers Court. The Tribunal found against the Appellant, considering itself bound by the decision of the Court of Appeal in Gala Unity Ltd v Ariadne Road RTM Co Ltd [2012] EWCA Civ 1372. The Upper Tribunal dismissed the Appellant’s appeal on the basis that, amongst other things, it too was bound by Gala Unity. The UT did however issue a leapfrog certificate for an appeal directly to the Supreme Court. This was the first time that the UT has issued such a certificate.

 

Held – Appeal unanimously allowed, and held that Gala Unity was wrongly decided.

 

The right to manage grants the Respondent the right to perform the relevant management functions over “the premises”. Treating it as applying to shared common facilities raised insuperable problems. The lessees of flats in blocks other than that over which the right to manage has been exercised would be effectively disenfranchised by having shared Estate Services provided by an RTM Company with which they had no formal legal relationship. This would also be contrary to the terms of their leases and was the opposite of what the right to manage under the 2002 Act was supposed to achieve.

The statutory language in the 2002 Act included numerous signposts pointing against the Estate Facilities forming part of the “premises” over which the right to manage was exercisable. That construction of the 2002 Act was confirmed, but no more than that, by the Consultation Paper which accompanied the draft bill which later became the 2002 Act.

The scope of the right to manage contended for by the Respondents would lead to outcomes, such as on the facts of the present case, which were both absurd and unworkable. It was obviously preferable to interpret the 2002 Act in a way which did not lead to an unworkable situation absent such agreement.

The right to manage under the 2002 Act does not therefore extend to the Respondent managing the shared Estate Facilities, which do not form part of the “premises” over which it is exercisable. The Appellant remains the sole party responsible for providing the Estate Services to all lessees on the Estate and entitled to levy Estate Charges accordingly, including from the lessees of flats in Settlers Court. Gala Unity was wrongly decided and should be overruled.

 

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

For a non-PDF version, 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

10 Nov 2021
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11 Nov 2021
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