The claimant father, who cares for his children for three days a week, applied to share child tax credits with their mother. HMRC refused on the grounds that as a minority carer he was not “responsible” for the children within the terms of the Child Tax Credit Regulations 2002, SI 2002/2007. The claimant’s appeal against this refusal argued that the legislative scheme breached ECHR, art 14 by indirectly discriminating against men, as fathers on the whole were more likely than mothers to have secondary, yet significant, responsibility for their children. HMRC accepted that the legislative scheme indirectly discriminated against men, and so the key issue for the Supreme Court was whether that discrimination was objectively justified.

The Supreme Court unanimously dismissed the appeal. The specific test for justifying discrimination in the context of state benefits was set out in Stec v UK (2006) 43 EHRR 1017, where it was held that with questions of social and economic strategy the Court will generally respect the legislature’s policy choice unless it was “manifestly without reasonable foundation”. HMRC’s aim in this scheme was to reduce child poverty, and splitting the CTC between two carers could result in neither being able to provide for the children’s needs.

For judgment, please download: [2012] UKSC 18
For Court’s press summary, please download: Press Summary
For a non-PDF version of the judgment, please visit: BAILII

On 25 April 2012 the Supreme Court handed down two major judgments on age discrimination: Homer v Chief Constable of West Yorkshire Police [2012] UKSC 15 and Seldon v Clarkson Wright and Jakes [2012] UKSC 16. In both cases Lady Hale delivered the leading judgment with which the other Supreme Court Justices all agreed. As might have been expected in the circumstances, the decisions shine the light of principle on this contested and difficult area of law.

Discrimination on grounds of age, alone of all the characteristics now protected by the Equality Act 2010, is capable of discrimination whether the discrimination is direct or indirect. Discrimination relating to the other protected characteristics (broadly sex, race, disability, sexual orientation and religion/belief) is subject to a general justification defence only where it takes the indirect form. In this, the Equality Act and its predecessor provisions (specifically the Employment Equality (Age) Regulations 2006, under which the Seldon and Homer cases were brought) mirror the provisions of Council Directives 2000/43 and (of direct relevance here) 2000/78.

Seldon concerned the question whether direct age discrimination in the form of mandatory retirement aged 65 was justifiable. At the time, domestic law provided a default retirement age of 65, subsequently abolished. The default retirement age was not applicable to the claimant in Seldon, however, given that he was a partner in a law firm. The firm’s policy was to retire partners at 65 in order (1) to ensure that associates could progress to partnership after a reasonable period; (2) facilitate long-term workplace planning and (4) “limit[] the need to expel partners by way of performance management, thus contributing to a congenial and supportive culture”. The question for the Supreme Court was whether this approach was lawful, in particular, whether the imposition of a mandatory retirement age by an employer could be justified by reason of Article 6(1) of Directive 2000/78 which provides that “Member States may provide that differences of treatment on grounds of age shall not constitute discrimination, if, within the context of national law, they are objectively and reasonably justified by a legitimate aim, including legitimate employment policy, labour market and vocational training objectives, and if the means of achieving that aim are appropriate and necessary”.

Lady Hale having pointed out that the Directive acknowledged, in recital 25, “that age discrimination might be justified by factors which had nothing to do with the characteristics of the individual but had to do with broader social and economic policy” [3], suggested that the reason that these factors could justify direct discrimination on the ground of age alone was [4] because “age is different… not ‘binary’ in nature (man or woman, black or white, gay or straight) but a continuum which changes over time… younger people will eventually benefit from a provision which favours older employees, such as an incremental pay scale; but older employees will already have benefitted from a provision which favours younger people, such as a mandatory retirement age”. Lady Hale posed [5], as the “critical issues in this case … what sort of policy considerations can justify such discrimination, who decides upon them, and how they are to be applied to any individual person”.

It was argued for Mr Seldon that the domestic Regulations, which provided the same justification test for direct and indirect discrimination (Reg 3: whether the measure complained of was “a proportionate means of achieving a legitimate aim”), were incompatible with the Directive which, it was suggested, permitted direct discrimination to be justified only in line with Article 6(1) which, it was said, was directed only at the broad policy aims of the state rather than with those of the individual employer. Lady Hale reviewed the authorities at domestic and CJEU level (the latter consisting of no fewer than 12 cases from Mangold v Helm [2006] 1 CML 1132 to and Case C-447/09 Prigge & Ors v Deutsche Lufthansa AG [2011] IRLR 1052). From these cases she drew the following conclusions ([50], my numbering):

(1)   that direct age discrimination could be justified only by reference to social policy objectives of a public interest nature;

(2)   that the tests for justification of indirect and direct (age)discrimination were not identical;

(3)   that it was for Member States rather than individual employers to establish the legitimacy of the aim pursued;

(4)   that flexibility for employers was not itself a legitimate aim, although “a certain degree of flexibility may be permitted to employers in the pursuit of legitimate social policy objectives”;

(5)   that among the (overlapping) legitimate aims recognised to date in this context have been:

1.  the promotion of access to employment for younger people;
2. the efficient planning of the departure and recruitment of staff;
3. the fair distribution of employment opportunities across generations;
4. ensuring a mix of generations of staff so as to promote the exchange of experience and new ideas;
5. rewarding experience;
6. cushioning the blow for long serving employees who may find it hard to find new employment if dismissed;
7. facilitating the participation of older workers in the workforce;
8. avoiding the need to dismiss employees on the ground that they are no longer capable of doing the job which may be humiliating for the employee concerned; and
9. avoiding disputes about the employee’s fitness for work over a certain age.

(6)   that in all cases “the measure in question must be both appropriate to achieve its legitimate aim or aims and necessary in order to do so”, the gravity of the effect on the employees discriminated against being weighed in the balance against the importance of the legitimate aims pursued;

Lady Hale suggested that the legitimate aims recognized by the CJEU could be characterized as relating to two broad aims: “inter-generational fairness” and “dignity” [56], [57]. The former was “comparatively uncontroversial” the latter “more controversial”, Lady Hale expressing “some sympathy” [58] for the view that arguments linking age to incapacity (as in (5)(h) above) “look suspiciously like stereotyping” [57] but stating that “the Luxembourg court has held that the avoidance of unseemly debates about capacity is capable of being a legitimate aim” [58].

Regulation 3 of the Age Regulations could be interpreted [55] as indicating the exercise of a choice by the UK ”to give employers and partnerships the flexibility to choose which objectives to pursue, provided always that (i) these objectives can count as legitimate objectives of a public interest nature within the meaning of the Directive and (ii) are consistent with the social policy aims of the state and (iii) the means used are proportionate, that is both appropriate to the aim and (reasonably) necessary to achieve it”. The question was not generally, Lady Hale ruled, whether the application of the mandatory rule to the individual (Mr Seldon) could be justified in line with this test (the requirement for such justification “in many cases … negat[ing] the purpose of having a rule” [65]), rather whether the adoption of a mandatory age by the employer could be so justified [66].

Turning to consider the application of the justification test in the particular case, Lady Hale accepted the conclusion of the Tribunal that the aims pursued by the Defendant were legitimate. As to the question of proportionality – specifically, whether the ends pursued justified the selection of a retirement age at 65, as distinct from any other age, the Employment Appeal Tribunal had concluded that the fixing of the retirement age at 65 was not proportionate to the third aim pursued and had referred back to the Tribunal the question whether that age could be justified by reference to the other legitimate aims alone. That referral stood, Lady Hale suggesting that “In answering that question, I would not rule out their considering whether the choice of a mandatory age of 65 was a proportionate means of achieving the first two aims. There is a difference between justifying a retirement age and justifying this retirement age” [68].

The question of proportionality also fell to be referred back to the Tribunal in Homer, which concerned indirect rather than direct age discrimination. The question was whether a requirement that, in order to achieve promotion beyond a certain grade, candidates had to be in possession of a law degree or equivalent indirectly discriminated against older workers. The Claimant was 62 at the point at which he was disadvantaged by the rule, a mandatory retirement age of 65 (extendable by one year at the discretion of the employer) then operating within the Defendant organisation. He argued that, completion of any law degree taking him beyond his retirement date, he was the victim of unjustified age discrimination against those aged 60-65. A Tribunal upheld his claim but the EAT and the Court of Appeal ruled that the employer had not applied any provision criterion or practice which disparately impacted on him as an older worker. According to these courts, any disadvantage the Claimant experienced resulted from his proximity to leaving the Defendant’s employment (albeit because of the Defendant’s mandatory age-related termination policy), rather than from the Defendant’s rule about qualifications.

In reaching this conclusion the EAT and Court of Appeal adopted the same rigid and unhelpful approach to the identification (subject to questions of justification) of indirect discrimination as has characterised much of the domestic jurisprudence since the early days of the Sex Discrimination Act 1975. Lady Hale was having none of it:

“13. This argument involves taking the particular disadvantage which is suffered by a particular age group for a reason which is related to their age and equating it with a similar disadvantage which is suffered by others but for a completely different reason unrelated to their age. If it were translated into other contexts it would have alarming consequences for the law of discrimination generally. Take, for example, a requirement that employees in a particular job must have a beard. This puts women at a particular disadvantage because very few of them are able to grow a beard. But the argument leaves sex out of account and says that it is the inability to grow a beard which puts women at a particular disadvantage and so they must be compared with other people who for whatever reason, whether it be illness or immaturity, are unable to grow a beard.

14. Ironically, it is perhaps easier to make the argument under the current formulation of the concept of indirect discrimination, which is now also to be found in the Equality Act 2010. Previous formulations relied upon disparate impact – so that if there was a significant disparity in the proportion of men – affected by a requirement who could comply with it and the proportion of women who could do so, then that constituted indirect discrimination. But … the new formulation was not intended to make it more difficult to establish indirect discrimination: quite the reverse … It was intended to do away with the need for statistical comparisons where no statistics might exist. It was intended to do away with the complexities involved in identifying those who could comply and those who could not and how great the disparity had to be. Now all that is needed is a particular disadvantage when compared with other people who do not share the characteristic in question. It was not intended to lead us to ignore the fact that certain protected characteristics are more likely to be associated with particular disadvantages…

17… The law of indirect discrimination is an attempt to level the playing field by subjecting to scrutiny requirements which look neutral on their face but in reality work to the comparative disadvantage of people with a particular protected characteristic. A requirement which works to the comparative disadvantage of a person approaching compulsory retirement age is indirectly discriminatory on grounds of age…”

Lady Hale went on to rule that the question of justification had to be referred back to the Tribunal to consider, the approach taken at first instance having been flawed. The correct approach required [22] consideration of appropriateness and necessity, the latter including the question of proportionality. Whether the imposition of the rule was justified required [24] a comparison of the impact of that criterion upon the affected group as against the importance of the aim to the employer” and [25] “[t]o some extent … whether there were nondiscriminatory alternatives available”.

Whatever the eventual outcome of this case (Lady Hale giving a gentle steer to the Defendant to make an exception in Mr Homer’s case, an approach from which Lord Mance alone demurred), the decision is to be welcomed for its purposive approach to indirect discrimination. This area of the law has been dogged since the beginning by an unduly technical approach to a question the answer to which should turn largely on the question of justification. It is, in particular, doubtful whether the recent decision of the Court of Appeal in Eweida v British Airways plc [2010] ICR 890, currently before the European Court of Human Rights, is consistent with the approach adopted by the House of Lords in Homer.

“Mr Clarke revealed that new laws would be put in place to remove obstacles which can limit diversity in the judiciary. They include changing the rules to extend part-time working patterns for senior judges, intended to help balance work and family lives, and enabling ‘positive action’ for appointments – meaning that if two candidates are completely equal in their abilities, a selection can be made on the basis of improving diversity.

The moves will not change the over-riding principle of appointments based on merit but are intended to enable clear career progression, encourage applications from a wider talent pool and continue to create a judiciary which reflects society.

The changes are the latest part of ongoing work to bring more diversity among judges, which is being carried out in partnership with the judiciary, the Judicial Appointments Commission (JAC) and the legal professions.

Justice Secretary Kenneth Clarke said:

‘We are lucky in this country that we have the finest judiciary in the world. We intend to build on that – we will continue to recruit the very best judges but at the same time we will do what we can encourage top applicants from a diverse range of backgrounds, so that the judiciary better reflects society.’

The proposed changes have been included in the new Crime and Courts Bill.”

From Wednesday 16 May 2012 over two days is DD (Afghanistan) v Secretary of State for the Home Department, to be heard by the same panel. This is another challenge to the test for exclusion under Art1 F(c). The appellant in this matter is the younger brother of and was deputy to a prominent commander of the Jamiat-e-Islami, an organisation allied to the Taliban. His application for asylum was refused and the Secretary of State sought the exclusion of the appellant. It is for the Supreme Court to determine whether evidence of participation in military activity against Afghan and UN mandated NATO forces as a member of an insurgent group amounts to conduct contrary to the principles and purposes of the United Nations under Art1 F(c). Here are the case details.

On Wednesday 16 May 2012 the Supreme Court will hand down judgment in Humphreys v The Commissioners for Her Majesty’s Revenue and Customs.

There are no sittings or hand downs in the Privy Council this week.

The following Supreme Court judgments remain outstanding:

Stanford International Bank Ltd (acting by its joint liquidators) v Director of the Serious Fraud Office, heard 23 – 25 January 2012.

Assange v The Swedish Judicial Authority, heard 1 – 2 February 2012.

R (KM) (by his mother and litigation friend JM) v Cambridgeshire County Council, heard 7 – 9 February 2012.

Test Claimants in the Franked Investment Income Group Litigation v Commissioners of Inland Revenue and anor, heard 20 – 29 February 2012.

R (HH) v Deputy Prosecutor of the Italian Republic, R (PH) v Deputy Prosecutor of the Italian Republic, Genoa, BH (AP) and another v The Lord Advocate and another (Scotland), KAS or H (AP) v The Lord Advocate and another (Scotland) and Genoa  Filipek-Kwasny v Polish Judicial Authority, heard 5 – 8 March 2012.

NJDB v JEG & Anor, heard 13 March 2012.

Perry & Ors v Serious Organised Crime Agency and Perry & Ors (No. 2) v Serious Organised Crime Agency, heard 20 – 23 March 2012.

R v Waya, heard 27 – 30 March 2012.

Fairclough Homes Ltd v Summers, heard 18 – 19 April 2012.

R (Alvi) v Secretary of State for the Home Department, heard 24 – 27 April 2012.

Secretary of State for the Home Department v Munir and anor, heard 24 – 27 April 2012.

Oracle America Inc (formerly Sun Microsystems Inc) v M-Tech Data Ltd, heard 30 April – 1 May 2012.

Phillips v Mulcaire, heard 8 May – 10 May 2012.

Background

The respondent, Nicolas Phillips, is a former assistant to the publicist Max Clifford.  She brought proceedings against News Group Newspapers Ltd and Mr Mulcaire for damages for breach of confidence and misuse of private arising out of “phone hacking”.  Ms Phillips sought an order that Mr Mulcaire swear an affidavit giving information about the individuals who had instructed him, the interception he was instructed to carry out and other matters.

Mr Mulcaire refused to provide this information, invoking the privilege against self-incrimination (“PSI”). Ms Phillips, in turn, relied on the “exception” to PSI in section 72.  This provides that

‘(1)     In any proceedings to which this subsection applies a person shall not be excused, by reason that to do so would tend to expose that person … to proceedings for a related offence … :

(a) from answering any question put to that person in the first-mentioned proceedings; or

(b) from complying with any order made in those proceedings.

(2) Subsection (1) applies to the following civil proceedings in the High Court, namely:

(a) proceedings for infringement of rights pertaining to any intellectual property or for passing off;

(b) proceedings brought to obtain disclosure of information relating to any infringement of such rights or to any passing off;

(c) proceedings brought to prevent any apprehended infringement of such rights or any apprehended passing off.

(3) …. [N]o statement or admission made by a person:

(a) in answering a question put to him in any proceedings to which subsection (1) applies; or

(b) in complying with any order made in any such proceedings, shall, in proceedings for any related offence … , be admissible in evidence against that person …

(5) In this section:

“intellectual property” means any patent, trade mark, copyright, design right, registered design, technical or commercial information or other intellectual property;

“related offence”, in relation to any proceedings to which subsection (1) applies, means:

(a) in the case of proceedings within subsection (2)(a) or (b):

(i) any offence committed by or in the course of the infringement or passing off to which those proceedings relate; or

(ii) any offence not within sub-paragraph (i) committed in connection with that infringement or passing off, being an offence involving fraud or dishonesty;

(b) in the case of proceedings within subsection (2)(c), any offence revealed by the facts on which the plaintiff relies in those proceedings; ….’.

On 17 November 2010, Mann J held that Mr Mulcaire was not entitled to rely on the PSI ([2010] EWHC 2952 (Ch)).  On 1 February 2012 the Court (Lord Judge, Lord Neuberger and Maurice Kay LJ) unanimously upheld the ruling of Mann J that, as a result of the operation of section 72 of the Senior Courts Act 1981, Mr Mulcaire was not entitled to rely on PSI ([2012] EWCA Civ 48).  The Court also dealt with an appeal from a decision of Vos J on the same point in a case brought by the comedian Steve Coogan.  This has now settled and was not before the Supreme Court.

In the Court of Appeal Lord Neuberger MR delivered the sole judgment. He began his analysis with some general observations about PSI, concluding

“I would take this opportunity to express my support for the view that PSI has had its day, provided that its removal is made subject to a provision along the lines of section 72(3). Whether or not one has that opinion, however, it is undoubtedly the case that, save to the extent that it has been cut down by statute, PSI remains part of the common law, and that it is for the legislature, not the judiciary, to remove it, or to cut it down” [18].

In relation to the first issue, he began by noting that the only basis upon which it could be said that the information intercepted from the claimants’ phones constituted ‘intellectual property’ as defined in section 72(5) was if it was ‘technical or commercial information or other intellectual property’. [22]

Lord Neuberger rejected the argument put forward by the Secretary of State (as an interested party) that “commercial information” should be broadly interpreted because section 72, together with the PSI restrictions contained in the Theft Act 1981 and the Fraud Act 2006 represent a “coherent code” to limit PSI. Conversely, he found that the provisions in question were “piecemeal” and “arbitrary” and operate in wholly different contexts. [28]

He expressed the provisional view that this expression meant confidential information which is technical or commercial in character. After considering a number of authorities and textbooks he said

“while the prevailing current view is that confidential information is not strictly property, it is not inappropriate to include it as an aspect of intellectual property. Accordingly, unless there is binding authority to the contrary, I am of the view that, given the normal meaning of ‘commercial information’, the draftsman of section 72 intended confidential information of a commercial nature to be included in the definition of ‘intellectual property’” [39].

Lord Neuberger then went on to consider whether “non-commercial confidential information” fell within the ambit of the definition of intellectual property in section 72.  Although, at first sight it might appear that the answer was “no”, he concluded that such information did, in fact, constitute “other intellectual property”, essentially for four reasons.

First, if confidential commercial information was intellectual property then non-commercial confidential information would be “other intellectual property” [46].  He suggested that the reason why the draftsman did not simply use the words “confidential information” was that, in 1981, the law of confidential information was only rarely applied to personal confidences [47].

Second, there were practical reasons for including personal confidential information because

“It would be surprising if PSI could be invoked by a defendant in relation to a breach of confidence claim which related to personal information, but not where the nature and circumstances of the claim were identical, save that it related to commercial information” [51]

Third, if personal confidential information is not intellectual property, the same information could be commercial in one person’s hands and personal in the hands of another.  “If commercial information, but not personal, information is within section 72, then the applicability of the section could, in some cases, turn on how the claim is pleaded – a most unattractive result“. [52]

In relation to the problem of “mixed messages” – ones which contain some confidential information and some non-confidential information – Lord Neuberger was of the view that there was a “strong presumption that at least some of the information contained in the messages is confidential” [55]. As a result, “if a defendant has intercepted a claimant’s voice messages … even where there is a significant preponderance of plainly non-confidential messages, he should nonetheless disclose them as part of the overall disclosure exercise” [56]

Lord Neuberger therefore concluded that the disclosure orders of Mann J should be upheld.

The second argument advanced by Mr Mulcaire was that information concerning the identity of those who had given instructions or to whom information had been passed, was information which would expose him to proceedings for a “related offence”. This was rejected on the basis that “where a person intercepts a voice message on the instructions of a third party, the giving of those instructions can fairly be said to be part and parcel of the interception”. [66]

Finally, Mr Mulcaire contended that s 72 was incompatible with the European Convention on Human Rights, art 6.  This argument was given short shrift by Lord Neuberger who said that, in his opinion, it was wrong [73] and was not supported by the Strasbourg jurisprudence [74]

Lord Neuberger’s conclusions were as follows:

i) Much of the information on the voicemail messages of the claimants which have been intercepted by Mr Mulcaire is likely to have been ‘commercial information or other intellectual property’ within section 72(5);

 ii) Although some of the information was not ‘commercial information or other intellectual property’, and, in Ms Phillips’s case, the confidence may have been that of her clients, section 72 can be relied on against Mr Mulcaire in both cases;

 iii) Para (a)(i) of the definition of ‘related offence’ in section 72(5) applies, and, while paras (a)(ii) and (b) do not, that does not assist Mr Mulcaire in resisting any aspect of the orders he is appealing;

 iv) Section 72, as so interpreted, is not incompatible with the Convention, and in particular Article 6; so the orders requiring Mr Mulcaire to give the information ordered by Mann and Vos JJ were correct;

 v) It would be inappropriate to impose any safeguards in favour of Mr Mulcaire over and above those contained in section 72(3);

 vi) Vos J’s order striking out references to PSI in Mr Mulcaire’s Defence in the proceedings brought by Mr Coogan was correct. [83]

Appeal to Supreme Court

Mr Mulcaire was granted permission to appeal to the Supreme Court, seeking to renew the contentions concerning PSI and section 72 which were rejected by the Court of Appeal.

Shortly before the hearing Mr Mulcaire described as “completely wrong” any claim that lodged the appeal to defend NGN.  In a statement released on Tuesday 8 May 2012, he said:

“This appeal is being heard because I have been advised by my legal team from the outset that I should not have to give potentially incriminating answers to questions asked of me in the phone-hacking cases in the high court. I bring it for no other reason. All the steps taken by my legal team in respect of the civil claims against me are to protect my legitimate legal interests.  Any suggestion that I am bringing this appeal, or defending the civil claims, to protect the company I used to work for, or any one at that company, would be completely wrong.”

In support of the appeal, Mr Millar QC argued

“At the widest scope of the court of appeal ruling you could catch all sorts of information that doesn’t bare any semblance to intellectual property, and that’s the problem with it,” he said. “I am not pretending that these are easy questions, but this is a difficult case which has thrown up difficult questions of construction.”

In response, Mr Michael Beloff QC, for Ms Phillips, supported the approach of the Court of Appeal to the construction of section 72.

If the appeal is dismissed it is likely that Mr Mulcaire will face detailed requests for information from many of the claimants in the continuing voicemail interception litigation, managed by Mr Justice Vos in the Chancery Division.

The facts

Summers was injured in an accident at work. The defendant company admitted that its negligence was responsible for the accident but contended that Summers’ dishonesty in fraudulently exaggerating his claim was cause for the court to strike out the case in its entirety. At first instance, HH Judge Tetlow disagreed with this contention and awarded damages of £88,000 to the claimant reflecting his findings as to the true value of the claim. The Court of Appeal rejected the defendant’s appeal. The case was heard in April by the Supreme Court Justices Lord Hope, Lord Kerr, Lord Clarke, Lord Dyson and Lord Reed.

The law

The issue of whether a claimant with an otherwise valid claim who substantially exaggerates that claim should lose their right to damages was considered by the Court of Appeal in the cases of Shah v Ul-Haq (2009) and Widlake v BAA Ltd (2009). In both these cases the defence had asked the court to give weight to an obiter comment made by Laws LJ in the case of Molloy v Shell (2001) that the court should be able to dismiss a claim where there was dishonest exaggeration on a large scale.

In Shah two legitimate claimants had fraudulently claimed that a third party was involved in an accident in which they were injured. Smith LJ found that there was no general rule that dishonest exaggeration of a genuine claim was grounds for dismissal of the whole claim. Furthermore, in considering the court’s powers to strike out the claim as an abuse of process under CPR Rule 3.4(2) she ruled that this could only be done in cases in which it is either not possible to have a fair trial or where, without some corrupted evidence, which has to be disregarded, the claim cannot succeed. She explicitly stated that the comment in Molloy was no more than wishful thinking on the part of Laws LJ and that on closer scrutiny such a finding was not within the court’s powers.

In dismissing the appeal in Shah, Smith LJ highlighted the court’s ability, and indeed willingness, to show their disapproval of a party’s behaviour by way of an adverse costs order. A similar line was taken by Ward LJ in Widlake in which he emphasised that punishment in costs was the appropriate remedy in the case of a fraudulently exaggerated claim. It seems a well established legal principle that it is not for the court to mark its disapproval by depriving the claimant of that to which they are entitled.

The Court of Appeal’s ruling

The short Court of Appeal judgment in Summers made it clear that the defence had not done enough to convince the court that Shah and Widlake had been wrongly decided, and dismissed the appeal.

Issues before the Supreme Court

It is now for the Supreme Court to decide whether there is some legal foundation for the withholding of damages for the valid part of the claim. At the hearing, the close questioning of the advocates for both claimant and defendant suggested that there was an appetite for exploring potential sanctions against dishonesty, but highlighted the potential difficulties of such a finding. In particular the absence of a definition of ‘substantial fraud’ and the difficulty for a court weighing up the gravity of the conduct against the potential loss to the claimant made the court wary of opening up the possibility of interminable hearings in relation to findings of substantial fraudulent exaggeration.

(i) Stanford International Bank Limited (acting by its joint liquidators) (Appellant) v Director of the Serious Fraud Office (Respondent); and

(ii) Stanford International Bank (acting by its joint liquidators) (Respondent) v The Director of the Serious Fraud Office (Appellant) (Oral Hearing)

Earlier this year, the Supreme Court  heard a complex dispute arising from the collapse of Stanford International Bank (“SIB”) in early 2009. The two appeals concern the proper administration of the world-wide assets of SIB in order to compensate the victims of an alleged “Ponzi” scheme perpetrated by (the then “Sir”) Allen Stanford and other individuals charged in the U.S. The key legal questions facing Lords Phillips, Brown and Kerr are likely to concern the interpretation of:

(1) The Cross Border Insolvency Regulations 2006;

(2) UNCITRAL Model Law on Cross-Border Insolvency; and

(3) The Proceeds of Crime Act 2002 (External Requests and Orders) Order 2005. SI No. 3181 (the “ERO Order”).

The facts

SIB was incorporated in 1990 (and at all times thereafter had its registered office) in Antigua and Barbuda.  The bank was allegedly involved in a ‘Ponzi’ fraud in which around 27,000 (primarily Central, North and South American) investors bought certificates of deposit amounting to $104bn.

In February 2009, a Texan Court made an order enabling the U.S. Securities and Exchange Commission to appoint a receiver (the “US Receiver”) over the assets of SIB, Allen Stanford and other individuals who were allegedly running the scheme.  In April 2009, the Antiguan High Court approved an application and a petition presented by the Financial Services Regulatory Commission of Antigua to appoint  joint liquidators of SIB (the “Antiguan Liquidators”) and approve the compulsory winding up of SIB.  Under the terms of the order, all of the assets of SIB, wherever situated, were vested in the Antiguan Liquidators.

On 6 April 2009, shortly before the handing down of the above order, the U.S. Department of Justice wrote to the U.K. (the “Letter of Request”) to request immediate assistance in relation to the fraud investigation by the DOJ pursuant to the U.S./U.K. Mutual Assistance in Criminal Matters Treaty.  The Letter of Request sought restraint in the UK of all assets of SIB, Allen Stanford and other named individuals so that they might be secured for confiscation at a later date.  The Serious Fraud Office then applied to the Central Criminal Court for an external restraint order, a request by an overseas authority to prohibit dealing with relevant property under Article 8 of the ERO Order, in respect of the assets set out in the Letter of Request.  The application was successful and the Restraint Order was granted to the SFO and served on SIB in late April 2009.

The Model Law – recognition applications

When $110m of SIB assets were identified as being held by certain financial institutions inEngland, the Antiguan Liquidators applied to the English High Court on 22 April 2009 for recognition of the Antiguan liquidation of SIB and for an order entrusting to them the distribution of the assets of SIB situated in the U.K.  This application was made under article 15 of the Model Law which was implemented in the U.K. by the Regulations.

On 8 May 2009 the US Receiver also applied to the High Court in England under Article 15 of the Model Law for recognition of the US Receivership of SIB (and the other SIB entities) as the foreign “main proceeding” and of himself as the foreign representative of SIB.

The First Instance decision in the High Court

In the approved judgment by Mr Justice Lewison on 3 July 2009, the recognition application of the Antiguan Liquidators as foreign representatives of a main proceeding under the Regulations was accepted, as the bank’s “centre of its main interest” (“COMI”) was Antigua.  As SIB’s registered office was in Antigua, it was presumed that the COMI must be there too.  Approving the ECJ’s judgment in Re Eurofood IFSC Ltd, Re (C-341/04) (2006), it was held that the onus was on the U.S. Receiver to rebut the presumption that the company’s COMI was at its registered office with factors that were both objective and ascertainable by third parties. The presumption was not rebutted and the U.S. Receiver’s application was dismissed.

Mr Justice Lewison also observed that the Texan court order appointing the U.S. Receiver was not made “pursuant to a law relating to insolvency” but rather to prevent the detriment of investors.  Lewison J said that the common law should supplement the Regulations and not usurp them.  If it is established that liquidators have been properly appointed with the power and duty to collect assets on behalf of all the creditors, then – unless exceptional circumstances arise – they should be able to continue such duties without outside interference from others.  This would promote a general policy of universalism, to enable there to be one collective proceeding in which all creditors were entitled to participate, irrespective of where they were located.

The Antiguan Liquidators were therefore the proper liquidators and were permitted to take possession of SIB assets within the jurisdiction and to remit the SIB assets toAntigua.

Misrepresentation and Material non-disclosure

It later emerged that the court had not been informed of the Restraint Order and as such, the SFO had not been provided with the opportunity to be heard on the applications pursuant to Article 17 of the ERO Order.  When the Restraint Order was made known to him at a subsequent hearing to determine the form of the High Court order, Lewison J modified his High Court order so as to take effect subject to the Restraint Order.

Central Criminal Court – HH Judge Kramer QC

The Antiguan Liquidators applied to Judge Kramer QC in the Central Criminal Court to vary the Restraint Order to enable the High Court judgment to be carried out.  During the hearing for this application, the evidence submitted to the court when the Restraint Order was made (in April 2009) was put for the first time before the Antiguan Liquidators, who then expanded their application to Judge Kramer QC in order to seek the discharge of the Restraint Order altogether on grounds of misrepresentation and material non-disclosure.  Both the respective applications to discharge and vary the Restraint Order were deemed unsuccessful.

The Court of Appeal decision

In February 2010, the Court of Appeal held as follows:

(1) Dismissing the U.S. Receiver’s appeal against the recognition of the Antiguan Liquidators as the foreign main proceeding as defined in Article 2 of the Model Law.  The Antiguan liquidation proceeding satisfied the conditions for the application of the Model Law because it was collective, judicial and pursuant to a law relating to insolvency.  Despite new evidence being presented before the court, the U.S. Receivers were held not to possess the necessary characteristics to be deemed a “foreign representative”.  Accordingly, the High Court was correct in following Re Eurofood to hold that the presumption could be rebutted only by factors that were both objective and ascertainable by third parties.

(2) (Arden LJ dissenting) allowing the U.S. Receiver’s appeal against the refusal of Judge Kramer QC at the Central Criminal Court to discharge or vary the Restraint Order which he made in April 2009 against those named in the Letter of Request under article 8 of the ERO Order.  The Restraint Order was set-aside on grounds of substantial misrepresentation and non-disclosure of material matters on behalf of the SFO when the Restraint Order was obtained without notice.  The granting of an order unlimited in point of time could not have been justified by proper disclosure (Brinks Mat Ltd v Elcombe [1988] 1 WLR 1350, 1357).

(3) However, the Restraint Order was re-granted but with effect from 29 July 2009, making it later in time than the date on which SIB was wound up by the High Court of Antigua.  Referring to article 46 of the Model Law, the Court of Appeal decided to re-grant the Restraint Order (which was to be tailored so as avoid inconsistency between the two orders) conferring on the SFO  administrative priority in respect of SIB’s assets in the U.K.

The Court of Appeal relied on Article 46(1)-(3) which states, at Article 46(2)(b), that the power to grant an external restraint order must be exercised “with a view to securing that there is no diminution in the value of the property identified in the external request”. Using this guidance, the Court of Appeal, having deemed references to “property” held by SIB to include references to property vested in the Antiguan Liquidators, held that the re-granting of the Restraint Order was necessary to stop the risk of diminution in the value of the deposits held in U.K. banks in the name of SIB in paying the costs of the Antiguan liquidation proceedings.

Comment

Practitioners of international insolvency law will be interested to see how the Supreme Court responds to the new appeals.  Of particular interest will be the interpretation of the COMI test in respect of the application of the Re Eurofood principles and how the competing claims under the Regulations which implement the Model Law are managed.

On Tuesday 8 May 2012 in the Privy Council is the appeal of Cukurova Finance International Ltd & anor v Alfa Telecom Turkey Ltd, which stems from litigation relating to the ownership of high value shares in a company based in the British Virgin Islands. The Court of Appeal of the BVI granted the appellants an order for a stay of parts of the order granting the respondent the ownership of the shares, but this was conditional upon the appellants paying $1.45bn to the Court as security. It is for the Judicial Committee to determine whether the appellants have permission to appeal this order. Here are the case details.

Starting on Tuesday afternoon and recommencing on Wednesday afternoon is the appeal of Kelly & Ors v Fraser, on appeal from the Court of Appeal of Jamaica. The appellants are trustees of the pension fund paid into by the respondent, and received payments into the fund after it had been discontinued. They agreed to distribute the surplus to the beneficiaries, but only the portion connected with payments made since a transfer of the scheme that they had not approved. The issues before the Judicial Committee are (i) whether the respondent must have carried out  a positive act order to establish detriment; (ii) whether the difference in value of the pension surplus is sufficient detriment to
establish estoppel; and (iii) did the Court of Appeal fail to consider certain materially relevant facts. Case details are available here.

On Thursday 10 May 2012 is Melanie Tapper v Director of Public Prosecutions (Jamaica), which considers whether a delay of three years between the date of the appellant’s arrest and the date the Court of Appeal handed down judgment on the matter breached the appellant’s right to a fair hearing. Here are the case details.

There are no hand-downs scheduled for this Wednesday. This is, again, due to the State Opening of Parliament.

The following Supreme Court judgments remain outstanding:

Stanford International Bank Ltd (acting by its joint liquidators) v Director of the Serious Fraud Office, heard 23 – 25 January 2012.

Assange v The Swedish Judicial Authority, heard 1 – 2 February 2012.

R (KM) (by his mother and litigation friend JM) v Cambridgeshire County Council, heard 7 – 9 February 2012.

Test Claimants in the Franked Investment Income Group Litigation v Commissioners of Inland Revenue and anor, heard 20 – 29 February 2012.

R (HH) v Deputy Prosecutor of the Italian Republic, R (PH) v Deputy Prosecutor of the Italian Republic, Genoa, BH (AP) and another v The Lord Advocate and another (Scotland), KAS or H (AP) v The Lord Advocate and another (Scotland) and Genoa  Filipek-Kwasny v Polish Judicial Authority, heard 5 – 8 March 2012.

NJDB v JEG & Anor, heard 13 March 2012.

Humphreys v The Commissioners for Her Majesty’s Revenue and Customs, heard 14 – 15 March 2012.

Perry & Ors v Serious Organised Crime Agency and Perry & Ors (No. 2) v Serious Organised Crime Agency, heard 20 – 23 March 2012.

R v Waya, heard 27 – 30 March 2012.

Fairclough Homes Ltd v Summers, heard 18 – 19 April 2012.

R (on the application of Alvi) v Secretary of State for the Home Department, heard 24 – 27 April 2012.

Secretary of State for the Home Department v Munir and anor, heard 24 – 27 April 2012.

Oracle America Inc (formerly Sun Microsystems Inc) v M-Tech Data Ltd, heard 30 April – 1 May 2012.

It has not been a good week for protestors. A man barred from protesting at the site of an Olympic basketball training facility has been ordered by a court to stay away from all Games venues. Simon Moore was jailed in April after admitting to public order offences over a protest at Leyton Marsh, east London. Westminster Magistrates’ Court granted an interim anti-social behaviour order  extending the ban to every 2012 venue and Diamond Jubilee celebrations. The Asbo will last until June when the court will decide whether to extend it. The High Court has lifted an injunction preventing the removal of the last anti-war protest tent near the Houses of Parliament. Judges said that it would be “lifted immediately”, leaving Westminster Council free to clear Parliament Square of the tent as soon as it is ready. The injunction had been in place while veteran peace campaigner Maria Gallastegui challenged the legality of new bylaws giving the local authority power to remove tents and sleeping equipment from the road and pavement around the square. The court refused Ms Gallastegui’s request that the injunction allowing her tent to remain in the square should be maintained while she asked the appeal court itself to consider her case. Ms Gallastegui has been conducting an authorised 24-hour vigil on the east pavement of Parliament Square since 2006 and obtained her injunction against the council preventing it from enforcing the byelaws.

A teenage boy has admitted religiously harassing a McDonald’s employee by repeatedly teasing her for being a practicing Pagan. The 16-year-old consistently provoked the female member of staff over her beliefs in what is understood to be the first case of its kind. Colchester Youth court heard how the teenager, from Lawford, north east Essex, harassed the McDonald’s employee between December 24 last year and February 18.  He repeatedly went into the restaurant in High Street, Colchester, to “tease” his victim, leading to the staff member becoming “very upset about it”. The Pagan Federation of Great Britain says that those who practice the belief are free to “pursue their own vision of the Divine as a direct and personal experience”. It defines Paganism as a “nature-worshiping religion” which incorporates a “rich diversity of traditions”. Sitting at the youth court on Wednesday, magistrates handed the teenager a three month referral order for religiously aggravated harassment.

People have a right to lampoon and criticise politicians and public officials under the Human Rights Act, the High Court has ruled. Malcolm Calver, a councillor in a Welsh seaside village, had been censured by a standards watchdog for “bitching” about his colleagues online. He had claimed that minutes of a meeting had “more holes than Swiss cheese”, accused one fellow councillor of “disgraceful manipulation of children” and questioned the expertise of another. But the High Court said that although his words were “sarcastic and mocking”, he was entitled to complain about the way council meetings were run. Mr Justice Beatson concluded that Mr Calver’s right to freedom of expression should trump the earlier ruling by the Adjudication Panel for Wales that he had broken the code of conduct for local government. The judge said it was important to remember “the traditions of robust debate, which may include some degree of lampooning of those who place themselves in public office”.

The newly-appointed solicitor commissioner to the Judicial Appointments Commission (JAC) has expressed scepticism about targets and quotas for diversity as well as the ‘tipping point’ method of favouring under-represented groups. Alexandra Marks, a judge since 2002, said in an interview that targets ‘tend to become de facto quotas’ and the JAC should select only the most meritorious candidates. As for the so-called ‘tipping point’, where if two individuals are equally qualified the minority candidate is picked, she said: ‘This is superficially attractive, but how do you decide between a woman and a black person, for example? Which protected characteristic carries the greatest weight?’ Marks, a former partner at magic circle firm Linklaters, also criticised the ‘short-termist’ attitudes of law firms for not supporting partners and senior solicitors in seeking judicial roles.

England’s most prolific offender has almost 600 convictions to his name, official figures have disclosed. A further eight career criminals have been convicted more than 300 times, while dozens more have been in court 100 or more times. The Ministry of Justice data also show that some offenders have been found guilty of several of the most serious crimes, with three people convicted of three or more rapes and 29 people convicted of three or more firearms offences. However those with the greatest number of convictions are often homeless alcoholics or drug addicts who are repeatedly caught shoplifting or behaving badly in public and return to their old habits soon after being handed community punishments or short jail sentences.

An east London resident wants to take legal action after his apartment complex was earmarked for the use of surface-to-air missiles during the Olympics. Brian Whelan is challenging the management company of Bow Quarter in Bow after residents were told a missile system could be put on a water tower. An MoD spokesman said there were legal statutes in place which mean installations of this type can be made in the interests of national security. The water tower at Bow Quarter in Fairfield Road has been identified as the “only suitable site in the area” for the high-velocity missile system, according to leaflets delivered to the estate’s 700 residents on Saturday. The top of the tower is flat and offers a view of the sky above the Olympic Park. Brian Whelan suggested that an aerial position for missiles should have been built into the Olympic Park scheme, rather than using residential property.