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In this post Rebecca Khan, a Legal Support Assistant at Matrix Chambers, comments on the case of Khan v Meadows [2021] UKSC 21 – handed down on the 18th of June 2021. This appeal raised important questions about the application of the scope of duty principle in clinical negligence cases. The judgment is handed down together with the court’s judgment in Manchester Building Society v Grant Thornton UK LLP [2021] UKSC 20.

The Facts

The appellant, Ms Meadows, is the mother of a child with haemophilia and autism. Prior to her pregnancy, the appellant consulted her GP practice in 2006 to establish whether she carried the haemophilia gene. The appellant should have been referred to a haematologist for genetic testing. Instead, following blood tests, Ms. Meadows was negligently led to believe by the respondent Dr Khan, a general practitioner in the same practice, that she was not a carrier of the gene. As a result of this advice, and earlier consultations, Ms. Meadows was wrongly led to believe that any child she had would not have haemophilia.

Ms. Meadows became pregnant with her son Adejuwon in 2010, who was diagnosed with severe haemophilia shortly after his birth. Had Ms Meadows known that she carried the haemophilia gene, she would have undergone foetal testing for haemophilia while pregnant. This would have revealed the foetus was affected, and the appellant would then have chosen to terminate her pregnancy.

In 2015 Adejuwon was also diagnosed with autism, an unrelated condition. However Adejuwon’s autism made the management of his haemophilia more complicated. He is likely to be unable to manage his own treatment or administer his own medication. In itself, Adejuwon’s autism is likely to prevent him being in paid employment.

There is no dispute that Dr Khan is liable in negligence for the costs of bringing up Adejuwon attributable to his haemophilia. The issue in this case arises from the question of whether Dr Khan is liable for all costs related to Adejuwon’s disabilities arising from the pregnancy or only those associated with his haemophilia.

The judgments below

The High Court held that Dr Khan was liable for costs associated with both Adejuwon’s haemophilia and autism.

The Court of Appeal allowed Dr Khan’s appeal, finding her liable for costs associated with Adejuwon’s haemophilia only. It considered the scope of a defendant’s duty of care laid down in South Australia Asset Management Corpn v York Montague Ltd [1997] AC 191 (“SAAMCO”) as determinative of the issue. In concluding that Dr Khan should be liable for a type of loss which did not fall within the scope of the their duty to protect the Ms. Meadows against, the High Court judge had applied the “but for” causation test.

The Court of Appeal took the view that it was insufficient for the court to find that there is a link between the breach and the stage in the chain of causation, in this case the pregnancy itself, and thereafter to conclude that the appellant is liable for all the reasonably foreseeable consequences of that pregnancy. The High court had referred to one link in the chain of causation depriving the Ms. Meadows of the opportunity to terminate the pregnancy. The SAAMCO test requires the link to be between the scope of the duty and the damage sustained.

Supreme Court

Unanimously dismissing the appeal, the Supreme Court addressed the following issues:

The legal issue of whether in a clinical negligence case the court should follow the approach of ascertaining the scope of a defendant’s duty of care laid down by the House of Lords in the SAAMCO test, and, if it should, how that approach is to be applied.

The Supreme Court applied a six stage model to analyse the place of the scope of duty principle in the tort of negligence [28]. The model served to demonstrate that the questions of factual causation and foreseeability cannot circumvent the questions which must be addressed in determining the scope of the defendant’s duty [30].

The appellant submitted that the scope of duty principle in SAAMCO does not apply in clinical negligence claims, and is only applicable in cases of pure economic loss [61]. The court could not accept this submission, as there is no principled basis for excluding clinical negligence from the ambit of the principle. Holding that the scope of duty in question must consider the “nature of the service which the medical practitioner is providing” in order to determine what risks “the law imposes a duty on the medical practitioner to exercise reasonable care to avoid” [63].

Is the medical practitioner liable in negligence for the costs of bringing up the disabled child who has both conditions or only for those costs which are associated with the hereditary disease?

Applying the principles above, the court concluded that the losses relating to Adejuwon’s autism were outside the scope of Dr Khan’s duty of care [77]. Lord Leggatt considered the scope of duty principle’s application in this case to be straightforward. The only purpose of the appellants consultation was to learn if she carried the haemophilia gene. There was no finding that Dr Khan should or ought to have been aware of any fact which gave rise to a duty to advise on any other matter [84].

As the House of Lords made clear in SAAMCO, a professional whose duty is limited to advising on a particular subject matter is not responsible for all foreseeable adverse consequences to the claimant of giving negligent advice. They are only liable for losses which are “within the scope” of the adviser’s duty of care. In this case, the subject matter of the respondent’s advice was limited to whether the appellant carried the haemophilia gene and therefore only losses causally connected to that subject matter are within the scope of the their duty to the appellant [98].

Comment

This case highlights an important distinction in wrongful birth cases between medical services intended to prevent the birth of any child, and services advising on a specified risk connected to the birth.

The judgment serves as a reminder that the simple ‘but-for’ test is not always a sufficient condition for the imposition of liability, and only forms a precondition to legal causation. The importance of the scope of duty cannot be ignored, and has potential to play a significant role in limiting the defendant’s exposure to liability.

 

Rebecca Khan is a Legal Support Assistant at Matrix Chambers.

On appeal from: [2021] EWCA Civ 535

The Appellant (“SIB”) is a company incorporated in Antigua and Barbuda that went into liquidation in 2009. Most of SIB’s business was selling investment products to international customers. However, during 2003 to 2009, SIB was being run as a large Ponzi scheme. Customer withdrawals and payments when investment products supposedly matured were being made from capital invested by other customers rather than investment proceeds. In 2008, many customers requested withdrawals from SIB fearing that it may become insolvent.

SIB had four bank accounts with the Respondent (“HSBC”). These accounts were frozen by HSBC on 17 February 2009 following SIB’s owner, Mr Robert Stanford, being charged by the US Securities and Exchange Commission. Prior to the accounts being frozen, from August 2008, Mr Stanford purportedly authorised various payments from the accounts. This appeal concerns payments from the accounts totalling £116 million which were used to pay SIB’s customers, some directly and some after money was transferred by HSBC to SIB’s account with a different bank in Toronto (the “disputed payments”).

SIB’s claim is that HSBC was on notice that the instructions to make the disputed payments may have been part of a fraud. Accordingly, it is alleged that HSBC was under a duty of care, known as the Quincecare duty, to refuse to accept Mr Stanford’s instructions to pay out money from the accounts (the “Quincecare claim”). HSBC’s application for summary judgment to strike out SIB’s Quincecare claim was refused by the High Court. However, on appeal HSBC was successful.

This appeal is concerned solely with the following question: even if HSBC did owe SIB the Quincecare duty and was in breach of this duty, did the breach give rise to any recoverable loss by SIB?

 

HELD – Appeal dismissed by a majority. Lady Rose gave the lead judgment, with which Lord Hodge and Lord Kitchin agreed. Lord Leggatt, in agreement with Lady Rose, gave a concurring judgment. Lord Sales gave a dissenting judgment.

 

The Supreme Court distinguished between two sets of SIB’s customers. First, customers who escaped without loss because they withdrew their funds (as they were contractually entitled to do) before the SIB scheme collapsed and so were paid from the disputed payments (referred to as the “early customers”). Second, customers who risk losing almost all their money because they did not withdraw their funds before the collapse (referred to as the “late customers”).

The majority held that the disputed payments which relieved SIB of its liability to its early customers do not amount to a monetary loss. In the hypothetical scenario where HSBC had complied with its Quincecare duty, SIB might have had an extra £116 million on liquidation. However, it also would not have discharged any of the debts it owed to the early customers so they would also claim a dividend in the insolvency alongside the late customers. As there would be an extra £116 million for the liquidators to distribute, all the customers would get, say, 12 pence in the pound rather than the early customers getting 100 pence and the late customers only five pence. But precisely the same amount of SIB’s debt would be extinguished when the company is dissolved in both the hypothetical and real-world scenario. There is therefore no recoverable loss.

Addressing a sub-issue, the majority held that where a director, in breach of their fiduciary duties to a company, causes an insolvent company to pay off certain company debts, there may be cases where the director can be required to repay the insolvent company in respect of the payments. However, this fiduciary liability does not mean there is a more general principle that a person who is negligent can be liable where the negligence results in no monetary loss.

Lord Leggatt agreed with Lady Rose that SIB has not suffered loss because of the disputed payments. He holds that the fundamental principle of separate corporate personality means the interests of a company are in law distinct from those of the persons who have economic interests in the company. Thus, the losses suffered by a company are not the same as the losses suffered by its creditors. While there may be correlation between these different losses, in order to keep the law coherent, the distinction between them should not be blurred. Lord Leggatt also agreed with the majority with regard to the sub-issue on the liability of directors.

Lord Sales dissented. In his view SIB has suffered a loss. At the relevant times SIB was hopelessly insolvent. Therefore, SIB could not lawfully have paid the early customers the face value of the debts and, if it had not been deceived by Mr Stanford, it would not have chosen to do so; instead, it would have retained its money to spend on other, lawful purposes. Payment of more than was necessary to the early customers depleted SIB’s assets which constitutes a loss to SIB. It is not correct to treat the company as a pure abstraction. When SIB paid the early customers, its corporate personality in law was a vehicle to protect the general creditors as a whole. The funds used to make the disputed payments will not be used to pay the general creditors as a whole, as they should have been. This diversion of funds is a loss to SIB. In relation to the sub-issue, Lord Sales held that his view provides a clear explanation as to a director’s liability in this context. In law, the interests of a company which is hopelessly insolvent are fully aligned with those of its creditors as a general body. If a company’s money, under the control of the directors, is paid out to discharge the debts of some creditors out of the general body of creditors, the interests of the creditors as a general body, and hence the interests of the company, are prejudiced and this can give rise to recoverable loss.

For the judgment, please see:

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

For the Press Summary:

Press summary (HTML version)

To watch the hearing: 

Watch hearing

19 Jan 2022
Morning session
Afternoon session

Candey Ltd, the appellant, acted as a solicitor for Peak Hotels & Resorts Ltd (“PHRL”) between April 2014 and March 2016 in respect of worldwide litigation and various other matters. One such matter was an action in the High Court in London, referred to as “the London Litigation”.

On 21 October 2015, PHRL entered into a fixed fee agreement (the “FFA”) with the appellant, under which the appellant agreed to continue to act for PHRL in return for a fixed fee (the “Fixed Fee”). Payment of the Fixed Fee was deferred until the handing down of judgment on liability or settlement of the London Litigation, PHRL entering an insolvency process, or PHRL receiving funds. A deed of charge (the “Deed of Charge”) was entered into on the same day as the FFA, which granted a floating charge (a form of security) over PHRL’s assets.

PHRL was placed into liquidation in the British Virgin Islands (“BVI”) on 8 February 2016. The Respondents (the “Liquidators”) were appointed by the BVI court as liquidators of PHRL. The Fixed Fee became payable and the appellant lodged a proof of debt.

The London Litigation was settled by PHRL shortly before trial and the appellant was dis-instructed by the Liquidators on 3 March 2016. The monies PHRL received in relation to the settlement are referred to collectively as the “Settlement Proceeds”.

The appellant contended that its outstanding fees were payable in priority to sums payable to other creditors in PHRL’s liquidation and asserted an equitable lien over sums of money recovered or preserved in the course of the London Litigation. This lien is a form of security that arises by operation of equity for solicitors to be paid their proper fees for the successful conduct of litigation out of the money the client recovers or preserves through that litigation (or its settlement). The appellant also argued that the lien ought to be converted to a charge over that money under section 73 of the Solicitors Act 1974 (the “1974 Act”).

The deputy judge, amongst other matters, found that the appellant had waived its entitlement to an equitable lien when it renegotiated its retainer and accepted additional security for its fees in October 2015. The Court of Appeal agreed with the deputy judge on this point.

HELD: The Supreme Court unanimously dismissed the appeal.

Whether a solicitor’s equitable lien has been waived depends on the intention of the parties. The question is whether it is to be inferred that it was the intention of the parties that the lien should no longer exist. The intention must be assessed objectively in light of all the circumstances. Where solicitors take additional security, a relevant factor will be to what extent the taking of new security is inconsistent with the lien. A further relevant factor is whether, considering the professional relationship between solicitors and their clients, the solicitors explained to the clients that they were reserving their rights to an equitable lien. The authorities illustrate that if solicitors take additional security which is inconsistent with the lien and do not explain that the lien is being retained, then it is likely to be reasonable to infer that the lien is surrendered. This is particularly so where the solicitors take new security over the same property that the lien would apply to.

Applying these principles to the present case, the FFA and the Deed of Charge form a package of rights and obligations and new security arrangements which are inconsistent with the equitable lien. This is for two reasons. First, the new security created by the Deed of Charge extends over the same property as the equitable lien would do (being the Settlement Proceeds). This is regardless of the fact that the Deed of Charge also covers other property. Second, the FFA and the Deed of Charge expressly confer priority, in the event of insolvency, to one of PHRL’s backers, and therefore create different priorities than that of an equitable lien which would rank first. However, the provisions in the FFA for the earning and securing of interest on the Fixed Fee are not inconsistent with an equitable lien.

The professional obligation on solicitors to give express notice if they intend to retain an equitable lien where the new security is inconsistent with the lien is not displaced by the client obtaining independent legal advice. Therefore, the fact that the appellant required PHRL to take independent legal advice in relation to the FFA and the Deed of Charge does not change the court’s conclusion.

There is no express or implied assertion in the FFA or the Deed of Charge that the appellant reserved its lien, and evidence of communications between the appellant and PHRL take the matter no further.

The Court of Appeal was therefore entitled to find that the appellant’s equitable lien was waived when the parties entered into the FFA and the Deed of Charge.

 

For the judgment, please see:

Judgment (PDF)
Judgment on BAILII (HTML version)

For the Press Summary:

Press summary (HTML version)

To watch the hearing: 

2 March 2022     Morning session               Afternoon session

3 March 2022     Morning session               Afternoon session

On Wednesday 14th December the Supreme Court will hand down two judgments. The hand-downs will take place at 9:45 in Courtroom One:

Stanford International Bank Ltd (In Liquidation) v HSBC Bank PLC, on appeal from [2021] EWCA Civ 535. The Court was asked to consider whether an insolvent company suffer any loss if payments are made out of its bank accounts which discharge a debt owed by that company in an equivalent amount.

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 judgment will consider in what circumstances will solicitors have waived (or be inferred to have waived) their equitable lien when a solicitor enters into a security arrangement with a client?

The following Supreme Court judgments remain outstanding: (As of 19/12/22)

The Law Debenture Trust Corporation plc v Ukraine (Represented by the Minister of Finance of Ukraine acting upon the instructions of the Cabinet of Ministers of Ukraine) Nos. 2 and 3, heard 9-12 December 2019
East of England Ambulance Service NHS Trust v Flowers and Ors, heard 22 June 2021
Fearn and others v Board of Trustees of the Tate Gallery heard 7th December 2021
Canada Square Operations Ltd v Potter, heard 14th June 2022
R (on the application of VIP Communications Ltd (In Liquidation)) v Secretary of State for the Home Department, heard 4th October 2022
McCue (as guardian for Andrew McCue) (AP) v Glasgow City Council, heard 18th October 2022
Unger and another (in substitution for Hasan) v Ul-Hasan (deceased) and another, heard 20th October 2022
Chief Constable of the Police Service of Northern Ireland and another v Agnew and others (Northern Ireland), heard 14th-15th December 2022

In this post, Tara McCarthy and James Warshaw, associates in the litigation team at CMS, preview the decision awaited from the Supreme Court in Brake and Anor v Chedington Court Estate Ltd.

Factual Background

The respondents in the Supreme Court are a married couple, Mr and Mrs Brake, and their son. Mr and Mrs Brake lived on a farm which they ran as a wedding and events venue in partnership with a third party. Mr and Mrs Brake contributed the farm as property of the partnership. The partnership later acquired legal title to the cottage which was transferred to the three partners on trust for the partnership. Initially, the cottage was used as accommodation for a housekeeper, followed by a personal assistant and his family, before being used by Mr and Mrs Brake and their son when the main house was let.

Differences led to the dissolution of the partnership in 2013. In 2015, Mr and Mrs Brake were declared bankrupt and, in 2017, the partnership went into liquidation. Mr and Mrs Brake’s interest in the cottage vested in their trustee in bankruptcy. The farm was eventually sold to The Chedington Court Estate Ltd (“Chedington”) and Mr and Mrs Brake’s trustee in bankruptcy acquired the rights to the cottage. Mr and Mrs Brake allege that the trustee in bankruptcy then entered into various transactions with Chedington through which they eventually acquired the rights to the cottage and evicted Mr and Mrs Brake. Mr and Mrs Brake also allege these actions denied them the opportunity to purchase the cottage themselves.

Mr and Mrs Brake subsequently commenced eviction proceedings against Chedington – these proceedings have been heard separately. They also commenced insolvency proceedings against the liquidators of the partnership (the “Liquidation Application”) and against the trustee in Bankruptcy (the “Bankruptcy Application”). The purpose of this was (i) to unwind the disputed transactions between the liquidators and the trustee in bankruptcy and (ii) to establish that Mr and Mrs Brake’s pre-existing interests in the cottage had revested in them on the basis they were the sole or principal residents at the date of the bankruptcy. The High Court struck out the whole of the Liquidation Application. It is the latter (the Bankruptcy Application) with which the pending Supreme Court decision is concerned and on which this post will focus.

The strike out application

In January 2020, Chedington made an application to strike out several parts of the Bankruptcy Application on the basis that Mr and Mrs Brake lacked standing to bring it under the Insolvency Act 1986 (the “Act”).

Mr and Mrs Brake had brought their claim under s 303(1) of the Act, under which the decisions of trustees in bankruptcy can be contested. They did so both as trustees of the Brake family settlement and as the bankrupts. Chedington argued that as trustees of the Brake family settlement, Mr and Mrs Brake had no legitimate interest in any of the relief sought. It also argued that in their personal capacity, they had no legitimate interest in the relief sought in relation to the transaction concerning the cottage. On the other hand, Mr and Mrs Brake argued that a bankrupt who is also a bidder for a property is entitled to challenge the decision of the trustee in bankruptcy when an allegation is made that the process is unfair.

By an order dated 2 March 2020, the judge struck out substantial parts of the Bankruptcy Application on the basis that Mr and Mrs Brake had no standing to seek the relief claimed under s 303(1) of the Act, either as trustees of the Brake family settlement, or as bankrupts. As to the former, they were simply unsuccessful bidders for the cottage and outsiders to the bankruptcy. They therefore had no legitimate interest in the relief sought. As to the latter, a bankrupt can only challenge the decisions of a trustee where there is likely to be a surplus in the estate. It was accepted this was unlikely.

The Court of Appeal

After the majority of the Bankruptcy Application was struck out, Mr and Mrs Brake appealed. Firstly, they suggested that the judge was wrong to apply certain cases to define the boundaries within which a bankrupt can challenge the conduct of a trustee in bankruptcy under s 303(1) of the Act, and to hold that a bankrupt has no standing unless they can show there is likely surplus in the estate. Secondly, they disagreed with the suggestion that, as trustees of the family settlement, they had no connection with the bankrupts and their interests in securing the family home.

Before examining the Court of Appeal’s decision, it is important to bear in mind that s 303(1) of the Act states as follows:

“If a bankrupt or any of his creditors or any other person is dissatisfied by any act, omission or decision of a trustee of the bankrupt’s estate, he may apply to the court; and on such an application the court may confirm, reverse or modify any act or decision of the trustee, may give him directions or may make such other order it thinks fit”.

In their capacity as trustees

First, the judge considered Mr and Mrs Brake’s position in their capacity as trustees of the family settlement. Mr Davies QC for Mr and Mrs Brake submitted that they were invited to bid for the cottage and the process was unfair, unlawful and unconscionable. The judge concluded that, whilst it is clear that the court will give relief under either s 303(1) to rectify an unfair bidding process, this does not tell us whether an applicant who is a “mere bidder” has standing under s 303(1) to complain about the process. In Mahomed & Anor v Morris & Ors [2000] EWCA Civ 46, the judge commented that it could not have been Parliament’s intention that any outsider to the liquidation who was dissatisfied with the liquidator’s decision could attack it under s 168(5) of the Act. Here, the judge said the same must apply to a trustee in bankruptcy. Consequently, in their capacity as trustees, Mr and Mrs Brake were “strangers to the bankruptcy”, had no direct interest in it and lacked standing to bring the Bankruptcy Application under s 303(1). As a result, the appeal was dismissed in their capacity as trustees.

In their capacity as former bankrupts

The judge then went on to consider Mr and Mrs Brake’s standing under s 303(1) in their capacity as former bankrupts. It was seen as “settled law” that a bankrupt must show more than simply being a bankrupt to question the trustee in bankruptcy. The bankrupt must show a substantial interest which has been affected by the conduct complained of and a direct interest in the relief sought. The potential existence of a surplus is one way of demonstrating this, but not the only one.

It was held that the first instance judge was wrong to have concentrated solely on whether there was surplus in this case. The Brakes had a legitimate and substantial interest in the relief sought to give them standing under s 303(1). Consequently, the appeal was allowed in Mr and Mrs Brake’s capacity as former bankrupts.

Supreme Court

The Supreme Court gave Chedington permission to appeal this decision, and the appeal was heard on 1 November 2022. We await judgment, at which stage we will find out whether the decision of the Court of Appeal (that Mr and Mrs Brake had standing as former bankrupts in respect of the Bankruptcy Application) stands.

Chedington’s appeal centres on the ground that bankrupts cannot have standing to interfere in bankruptcies where the relief sought would have no impact on their position within such bankruptcies. The judgment should provide useful clarity on when there will be standing to make an application for the purposes of s 303(1) in order to challenge the decision-making of a trustee in bankruptcy.

This appeal concerned the meaning of a condition that was attached to the grant of planning permission for a development site in the outskirts of Swindon. The proposed development included two roads, a “North-South access road” which ran southward from a new junction with the A420 and continued to the southern boundary of the site, and an “East-West spine road” which ran to the eastern boundary of the site from a roundabout on the North-South access road. The appellant’s planning committee granted outline planning permission for the site subject to a number of conditions. Condition 39 read as follows:

“The proposed access roads, including turning spaces and all other areas that serve a necessary highway purpose, shall be constructed in such a matter as to ensure that each unit is served by fully functional highway, the hard surfaces of which are constructed to at least basecourse level prior to occupation and bringing into use. Reason: to ensure that the development is served by an adequate means of access to the public highway in the interests of highway safety.”

The respondent subsequently applied for a certificate under section 192 of the Town and County Planning Act 1990 to confirm that the formation and use of private access roads within the development would be lawful. The appellant, Swindon BC, refused to issue the certificate, asserting that condition 39 imposed an obligation on the owner of the site to dedicate the Access Roads as public highways. It was agreed between the parties that it would have been reasonable and lawful for Swindon BC to require that the Access Roads be dedicated as highways through the mechanism of a “planning obligation” (as distinct from a planning condition) under section 106 of the 1990 Act. However, the appellant argued that it could impose a planning condition to achieve the same result. The respondent disagreed, and further contended that condition 39 simply regulated the physical attributes of the Access Roads before the site was brought into use.

The Secretary of State’s Planning Inspector allowed the respondent’s appeal against Swindon’s refusal of the certificate. The High Court allowed Swindon’s application for a statutory review of the Inspector’s decision. The respondent then successfully appealed the judgment to the Court of Appeal, the decision of which Swindon BC now appeals.

 

HELD: The Supreme Court unanimously dismissed the appeal.

Issue 1: Is it lawful for a planning authority, in granting planning permission for a development, to impose a planning condition that the developer will dedicate land within the development site to be a public highway?

The Supreme Court holds that the statutory provisions relating to planning conditions in the 1990 Act do not exist in a vacuum, but fall to be interpreted in the context of the Act as a whole, including the provisions relating to compulsory purchase and planning obligations.

The Supreme Court considers the judgment in Hall & Co Ltd v Shoreham-by-Sea Urban District Council[1964] 1 WLR 240, which considered the circumvention of the relevant compulsory purchase regime by a purported planning condition. Agreeing with the Court of Appeal, the Supreme Court holds that Hall is authority for the fact that a planning authority may not lawfully require a landowner by means of a planning condition to dedicate land as a public highway.

As to planning obligations, the Supreme Court notes that these are, generally, agreed between the planning authority and the owner of the land under section 106 of the 1990 Act, while a planning condition is imposed by the planning authority. It is common practice to include an obligation on the owner of the land to dedicate part of its land for public use in a section 106 agreement, though this was not done in this case. The power to impose planning conditions is not unlimited: (1) the conditions must be imposed for a planning purpose and not solely for an ulterior one; (2) they must fairly and reasonably relate to the permitted development; and (3) they must not be so unreasonable that no reasonable planning authority could have imposed them. Moreover, there is an established policy position as to the scope of planning conditions, which is consistent with case-law, that they should not require the cession of land for road improvements. The Supreme Court goes on to consider the limits on the use of planning obligations contained in case-law and legislation, holding that there is a fundamental conceptual difference between a unilaterally imposed planning condition and a planning obligation, to which the developer can be subjected only by its voluntary act. The Supreme Court holds that the options for a planning authority, which wants to require the dedication of roads within a development site as public highways, are to negotiate an agreement with the landowner or to exercise powers of compulsory acquisition.

Issue 2: Properly interpreted, does condition 39 have the purported effect of dedicating land within the development site to be a public highway?

Planning conditions are to be interpreted in a similar manner to other public documents: the court asks itself what a reasonable reader would understand the words to mean when reading the condition in the context of the other conditions and the planning consent as a whole. This is an objective exercise in which the court will have regard to the natural and ordinary meaning of the relevant words, the overall purpose of the consent, any other conditions which cast light on the purpose of the relevant words, and common sense.

The Supreme Court holds that condition 39 does not purport to require the dedication of the Access Roads as public highways. Instead, it addresses the quality and timing of the Access Roads’ construction. The Supreme Court reaches this judgment for a number of reasons, including the fact that condition 39 makes no mention of any requirement to dedicate the Access Roads as public highways; the fact that condition 39 is part of a list of conditions addressing the design, method of construction, and physical characteristics of the means of access to the site; and the wider planning law context, including Hall v Shoreham, the well-established guidance on the imposition of planning conditions, and planning authorities’ practice of securing the dedication of roads by means of a section 106 agreement. Condition 39 is, therefore, a valid planning condition which does not purport to require the dedication of the Access Roads as public highways.

 

For the judgment, please see:

Judgment (PDF)

For the Press Summary, please see:

Press summary (HTML version)

Watch hearing

12 July 2022    Morning session  Afternoon session

In this post, Tobias Seger, an Associate at CMS, comments on the Supreme Court’s decision in Guest v Guest [2022] UKSC 27, handed down by the Supreme Court on 19 October 2022. This case concerns the proper approach to granting relief under the doctrine of proprietary estoppel.

Background

““One day my son, all this will be yours” Spoken by a farmer to his son when in his teens and repeated for many years thereafter.” This is Lord Briggs introduction to his judgment in Guest v Guest and this also summarises the facts at issue. As a result of this promise the son had lived and worked on his family’s farm for over 25 years, only earning a very small wage. Around 2008 there was a breakdown in the relationship between the father and son and as a result the son was removed from the will. The son applied to the court under the doctrine of proprietary estoppel to be awarded the farm that he was promised.

Proprietary estoppel applies where A (the promisor) makes a promise in relation to property to B (the promisee) and B relies on that promise to their detriment. A later reneges on that promise in a way that is unconscionable. In those circumstances B may have an action against A.

The court of first instance ruled that the son did have a valid claim on the basis of proprietary estoppel and ruled that the parents should sell the farm and the son should receive from the proceeds of sale 50% of the value of the farming business and 40% of the land and buildings of the farm (both payments to be made after tax). This was upheld by the Court of Appeal and subsequently appealed to the Supreme Court.

It was perceived that there was a “lively controversy” whether the remedy for a claim under proprietary estoppel should be compensation for the detriment suffered by the promisee or enforcement of the promise, as long as said enforcement would not be disproportionate.

Given the controversy, it is unfortunate Guest v Guest was decided in a 3-2 split decision, with two very persuasive judgments. The majority, following the judgment of Lord Briggs, ruled that the primary remedy should be enforcement of the promise, while the minority, following the judgment by Lord Leggat, argued that the remedy should be compensatory in nature. Nevertheless, the two judgments provide an extensive analysis of the relevant authorities, set out in more detail below and therefore provide a detailed review of the guiding principles going forward.

Legal Analysis

Lord Briggs (with Lady Arden and Lady Rose concurring) is of the view that when proprietary estoppel is engaged, the starting position is that the court should try to satisfy the promisee’s expectation, rather than compensating them for the detriment that they have suffered as a result of the promise being rescinded.

Lord Briggs analysed proprietary estoppel as something that stops the promisor from reneging on their promise. The court’s remedy is to hold the promisor to his original promise, similar to the doctrine of specific performance. His judgment stated that “the harm caused by the repudiation of the promise is not the same as the detriment suffered.” He noted that “[t]he true purpose, as recognised by the Court of Appeal in the present case, is dealing with the unconscionability constituted by the promisor repudiating his promise.” It is, in his view, wrong to treat that question as limited to the issue whether or not an equity arises and then not taking it into account when framing the remedy.

In summary, Lord Briggs argued that a court should approach a claim under proprietary estoppel in three stages:
(1) The court should determine whether the promisor’s repudiation is unconscionable.
(2) The second stage should start with the assumption that the simplest way to remedy the unconscionable repudiation is by holding the promisor to the promise.
(3) If the promisor can prove that the specific performance of the full promise, or monetary equivalent, would be out of all proportion to the cost of the detriment, then the court may consider to limit the remedy.

Lord Briggs concluded: “In my view therefore this court should firmly reject the theory that the aim of the remedy for proprietary estoppel is detriment-based forms any part of the law of England.”

On the other hand, Lord Leggat (and Lord Sales concurring with his judgment) focused on the fact that proprietary estoppel was originally based on the acquiescence by A in, or encouragement of, a mistaken belief by B that A had given them a property right. He stated that “[t]his understanding of the doctrine in negative and defensive terms, however, subsequently evolved into a conception of “proprietary estoppel” as a positive cause of action.” He suggested that this second form of proprietary estoppel would be better named a property expectation claim.

Lord Leggat emphasised that proprietary estoppel should be governed by principle and not just the conscience or sense of fairness of the individual judge. He argued that a property expectation claim does not operate in a binary way. The approach by the courts has not been that, provided there has been substantial reliance by the promisee, the promise will be enforced. Instead, there have been cases where a sum of money has been awarded to the claimant “which does not reflect, and was not intended to reflect, the value of what was promised.”

In terms of remedy, Lord Leggat agreed with Lord Briggs that the court can ask the promisor to perform the promise, however, in Lord Leggat’s view where there is more than one way to avoid detriment to the claimant the court should, in principle, adopt the remedial approach which imposes the least burden on the defendant. Lord Leggat’s principle position is therefore one where the court should seek to compensate for the detriment suffered by the promisee rather, as suggested by Lord Briggs, to hold the promisor to their promise.

Lord Briggs dismissed this view in his judgment stating that:

“the supposed logic of the detriment-based approach is in my view both faulty in origin and wrong in its inevitable result. It is faulty in origin because it fails to recognise that while reliant detriment is necessary to engage the equitable relief, and forms a large part of its moral justification, it is the repudiation of the promised expectation which constitutes the unconscionable wrong.”

While both judgments provide a wide review of the case law in this area, they both focus on the proper interpretation of the term “minimum equity to do justice” coined by Scarman LJ in Crabb v Arun District Council [1975] EWCA Civ 7.

Lord Briggs argued that the analysis proposed by Scarman LJ is all about fine tuning the fulfilment of the exception of the promise and has nothing to do with valuing and then compensating for the detriment suffered by a disappointed claimant. He also cited the case of Baker v Baker [1993] EWCA Civ 17 in support of this argument where it was held that the remarks by Scarman LJ should not be interpreted to suggest that the court necessarily had to place the minimum value on the disappointed interest.

The majority therefore upheld the general approach taken by the court of first instance. However, Lord Briggs held that the judge of first instance failed to properly take into account that the promise was being accelerated by the fact that the parents were still alive and so the claimant would not have been able to inherit anything at this point, even if the promise was still in place.

Lord Briggs therefore allowed the appeal to that extent and provided the parents with a choice to either put the farm under a trust, with the parents having a life interest in the meantime or to provide the claimant with a financial compensation now (including an appropriate discount taking into account the acceleration).

Turning to the minority decision. A key argument by Lord Leggat was that the law has set out clear rules that are necessary to transfer property and a mere promise does not fulfil those conditions. He noted that “[d]escribing failure to keep such a promise as “unconscionable” cannot justify disregarding law laid down by Parliament.” He argued that the doctrine does not and could not sensibly have as its aim the enforcement of promises which do not satisfy the requirements for the creation of legal obligations.

He therefore concluded that the remedy must focus on the detriment suffered and when there are multiple means of avoiding detriment to the claimant the court should use whichever remedy imposes the least burden on the defendant.

While he does not believe that Scarman LJ intended to lay down any general principles when using, the phrase “the minimum equity to do justice” has since been used many times to denote a general application. To do justice to the defendant requires the court not to award a remedy which is more generous to the claimant and more burdensome for the defendant than is necessary to achieve the underlying purpose for which the remedy is granted.

He concluded, like Lord Briggs, that the court of first instance failed to properly estimate the claimant’s reliance on the loss and Lord Leggat therefore provided his own calculation in the appendix to the judgment which resulted in a sum of £610,000 to be awarded to the claimant. In the original judgment the claimant was to be awarded around £1.3m.

Comment

Following the majority judgment, the law has now been clarified in relation to the proper remedy for a claim of proprietary estoppel. However, due to the fact that it was a narrow split decision with two very persuasive judgments the UKSC may not have succeeded in their aim to settle the lively debate that was referenced in both judgments.

The key takeaway for claimants and practitioners alike is that cases in relation to proprietary estoppel will be highly fact specific. While the test set out by Lord Briggs will be very helpful guidance going forward the question whether or not the fulfilment of the full promise is proportionate will be key.

Furthermore, as seen by the outcome of this case the court will be at pains to ensure a fair outcome for all parties involved and try to ensure that the defendant also does not suffer unnecessarily.

Finally, when deciding the remedy, careful consideration needs to be taken when there is an acceleration of the promise. In those circumstances, both judgments agree, an appropriate discount in the award needs to be made.

In this post, Mathew Purchase KC of Matrix Chambers previews the forthcoming judgment in the case of R (Day) v Shropshire Council, on appeal from [2020] EWCA Civ 1751. 

 

Background

Shrewsbury Town Council owned a plot of land which was subject to a statutory trust arising either under section 10 of the Open Spaces Act 1906 or, impliedly, under the Public Health Act 1875. Pursuant to that trust, the town council had to allow the public to enjoy the land as an open space.

Under the Local Government Act 1972 (‘the 1972 Act’), the town council was permitted to dispose of the land only if certain conditions were met. These included a requirement to advertise their intention to sell the land and to consider any objections. Section 123 of the 1972 Act expressly provided that, if those conditions were met, the land would no longer be subject to the statutory trust upon the disposal.

In 2017, the town council sold the land to a developer. Neither the town council nor the developer realised that the land was subject to the statutory trust and the town council did not comply with the statutory requirements for disposal.

The defendant council – a different body from the town council – subsequently granted planning permission to allow the developer to construct residential homes on the site. A local man, Dr Day, challenged that decision in a claim for judicial review.

There was no dispute that, under the statutory scheme, the sale of the land to the developer had been effective notwithstanding the failure to comply with the requirements. The central issue was whether the statutory trust nevertheless remained in force such that, in granting planning permission, the defendant council had failed to take into account a material consideration.

 

The judgments below

Lang J did not decide whether or not the statutory trust had been discharged or remained in force. She was satisfied that any subsisting public rights under such a trust could not be enforced against the developer such that, even though the defendant council should have taken the legal position into account, its decision would have been the same.

In a single judgment of the Court, the Court of Appeal (David Richards, Hickinbottom and Andrews LJJ) held that the land had been freed from the statutory trust upon disposal.

The Court had a number of reasons for that decision. However, the key reason was that section 128(2) of the 1972 Act provided not only that a disposal of land effected without compliance with the statutory requirements ‘shall not be made invalid’ for that reason, but also that the purchaser ‘shall not be concerned to see or enquire whether… any such requirement has been complied with’.

The Court took the view that, since section 128 already provided that a failure to comply with the statutory requirements would not in itself invalidate the sale, this express exclusion of the possibility that the purchaser could be fixed with ‘constructive notice’ of a local authority’s failure to comply with those requirements had to have some separate effect. The Court considered that the statutory intention was that the purchaser would be freed from the constraints of the statutory trust unless it actually knew that the requirements had not been met. That was so notwithstanding the fact that Parliament had made express provision for the trust to be discharged (only) if the statutory requirements were met and the fact that the sale would have taken place without members of the public being in a position to exercise its statutory right have their say over the possible loss of rights to open space.

Accordingly, there was no question of the defendant council having failed to take into account a material consideration and no other basis on which to interfere with then grant of planning permission. Accordingly, although for different reasons, the Court of Appeal dismissed the appeal against the decision of Lang J. The judgment is reported at [2020] EWCA Civ 1751 [2021] QB 1127.

 

The appeal

The issues before the Supreme Court are:

(1) When a local authority sells land which is subject to a statutory trust for public recreational purposes without complying with the relevant statutory requirements, does that trust continue or end? In either case, what are the legal implications for the authority and the buyer?
(2) Are the existence of any (former) statutory trust and public recreation rights material considerations that need to be taken into account in granting planning permission?

 

The appeal was heard on 07/12/22 by Lords Reed, Kitchen, Hamblen and Stephens and Lady Rose. Judgment is awaited.

On Wednesday 14th December the Supreme Court will hand down judgment in the case of DB Symmetry Ltd and another v Swindon Borough Council, on appeal from [2020] EWCA Civ 1331. The Court was asked to consider if it is lawful for a planning authority, in granting planning permission for a development, to impose a planning condition that the developer will dedicate land within the development site to be a public highway. The hand-down will take place at 9:45 in Courtroom One.

On Wednesday 14th December – Thursday 15th December, the Court will hear the case of Chief Constable of the Police Service of Northern Ireland and another v Agnew and others (Northern Ireland) , on appeal from [2019] NICA 32. The Court will consider the following issues: (1) Whether the Respondents, in bringing their complaints as to a series of unlawful deductions and underpayments of holiday pay, are restricted to a period ending no later than three months prior to the presentation of the complaints to the Tribunal. (2) What is meant by a series of unlawful deductions to pay and when such a series ends. (3) What is the correct approach to calculating unlawful deductions and underpayments of holiday pay, including the approach to annual leave entitlement, overtime and the reference period for calculating normal pay. (4) Whether the Respondents have been discriminated against contrary to Article 14 of the European Convention on Human Rights read in conjunction with Article 1 of Protocol 1. This hearing will take place at 10:30 in Courtroom Two.

The following Supreme Court judgments remain outstanding: (As of 16/12/22)

The Law Debenture Trust Corporation plc v Ukraine (Represented by the Minister of Finance of Ukraine acting upon the instructions of the Cabinet of Ministers of Ukraine) Nos. 2 and 3, heard 9-12 December 2019
East of England Ambulance Service NHS Trust v Flowers and Ors, heard 22 June 2021
Fearn and others v Board of Trustees of the Tate Gallery heard 7th December 2021
Stanford International Bank Ltd (in liquidation) v HSBC Bank PLC, heard 19th January 2022
Commissioners for Her Majesty’s Revenue and Customs v NCL Investments Ltd and another, heard 25th January 2022
Canada Square Operations Ltd v Potter, heard 14th June 2022
R v Andrewes, heard 21st June 2022
Hillside Parks Ltd v Snowdonia National Park Authority, heard 4th July 2022
DB Symmetry Ltd and another v Swindon Borough Council, heard 12th July 2022.
Reference by the Attorney General for Northern Ireland – Abortion Services (Safe Access Zones) (Northern Ireland) Bill, heard 19th July 2022
R (on the application of VIP Communications Ltd (In Liquidation)) v Secretary of State for the Home Department, heard 4th October 2022
McCue (as guardian for Andrew McCue) (AP) v Glasgow City Council, heard 18th October 2022
Unger and another (in substitution for Hasan) v Ul-Hasan (deceased) and another, heard 20th October 2022
Chief Constable of the Police Service of Northern Ireland and another v Agnew and others (Northern Ireland), heard 14th-15th December 2022