Tuesday, 29 March 2011

Morgan v The Spirit Group Limited [2011] EWCA Civ 68: careful what you wish for

I yield to nobody in my admiration of the Court of Appeal.  The judiciary have a very difficult job, distilling years of argument into a tight and digestible set of facts that then have to be applied to the law.  And the Court of Appeal has to then make sure that, where the law is on a knife edge, it is developed in the right way.

Sometimes the Court of Appeal is hamstrung by what it considers to be outdated precedent, hence referrals up to the Supreme Court.  And sometimes the Court of Appeal does not even need to do that.  It may be in a straightjacket, but it can still kick.

Mrs Morgan broke her wrist in a nightclub.  Bad move for the nightclub as Mr Morgan is a solicitor.  He acted for ’er indoors in her claim against the nightclub operators.  He was successful; at least to a point.  There was no need for a trial on liability, just one day in court on the damages.  Mrs M was claiming around £40k, she ended up with just over £10k.

The problem was the next step.  Costs.  One day hearing, on damages alone, work beforehand nailing liability, maybe one witness, how much would you charge?  Few grand?  Twenty?  Think again.  £99,206.29.  Including VAT, yes.  But Mr Morgan was claiming ten times what his wife had been awarded.  Half of that was a success fee – yes, he was working on a conditional fee.

The judge was astonished and slammed it down.  He had harsh words about Mr Morgan’s conduct of the case and decided that the absolute limit for costs for a minor claim would be £20,000.  He threw in another five k on top of that to take into account the conditional fee and left it there as a summary assessment.

Mrs Morgan appealed.  Obviously she had a vested interest in hubby receiving another £75k in costs, especially as half of them would be pure conditional fee profit.  And, much to the Court of Appeal’s dismay, she was successful.  The Court of Appeal was constrained by precedent to state that the judge’s approach was legally flawed.  He couldn’t just guesstimate an appropriate figure without at least making a token attempt at a line-by-line analysis of the bill; after all, there could be special reasons behind the escalation in costs.

The only conclusion was that the costs had to go back and be re-heard on a proper, detailed, summary assessment.  But there was a sting in the tail that contains a poison fatal to Mrs Morgan’s chances of that bonus £75,000.  The Court of Appeal said that the judge was right in saying that this was a basic matter.  Something that could easily have been dealt with by the Court under the fast track procedure.  Fast track.  I.e. a regime that puts a strict limit on costs.  For a start, the advocacy for the final day’s hearing would be limited to a few hundred pound.  And, as the nightclub owner’s brief put it before the Court of Appeal, and which the Court of Appeal pointedly included in its judgment, the costs on detailed assessment would probably be something south of the £25k Mrs Morgan felt was insufficient.

The Court of Appeal giveth, and the Court of Appeal taketh away.  Blessed be the name of the Court of Appeal.

Sunday, 20 March 2011

Attrill & ors v Dresdner Kleinwort Ltd & anor [2011] EWCA Civ 229: a wunch of bankers

Once upon a time, bonuses were for especial performance.  Indeed, in the real world, they are.  However when considering the banking world one is reminded of the words of the immortal Sir Humphrey Appleby.  “Do people still get the outstanding merit award?”  “Oh yes.  Everybody.”   

DK was a bank.  Note the “was”.  Its normal procedure for bonuses was to bung money into a pool in November, tell its employees what they’d get from it in December, and pay it out in January.  Problem came in 2008.  DK was losing money hand over fist.  €575m in the first quarter, even more in the second.  No money for bonuses?  That was it, thought the staff, we’re off.  Like rats leaving a sinking ship.

So in August 2008 DK held what it called a “town hall” meeting.  DK announced to employees that there would be a guaranteed bonus pool of €400m.  Where was this money coming from, given that DK was running out of it?  Aha, you may well ask.

The staff, encouraged by the size of the trough into which they could immerse their banking snouts, stopped leaving.  In December DK announced the bonuses payable to staff – yes, DK was paying bonuses, even though the bank’s performance might have suggested that any exceptional performance was non-existent.  The small print though was interesting.  “Subject to variation.”  The letter stated that it depended on whether DK’s earnings position deteriorated.

Evidently DK thought its earnings position HAD deteriorated, because when the bonuses came to be paid out in January the numbers were shrunken by 90%.  Common sense?  Not to the DK employees.  Not satisfied with their basic salary and bonuses amounting to up to €2m from a dying organization, a number brought proceedings against DK and its eventual purchaser Commerzbank.  The bonus was an entitlement, they said.  It had been promised to them, they had relied on the promises by not jumping ship.  The bonus could not be altered.

DK pointed to the wording in the letter, and to the contracts of employment; bonuses are discretionary.  And applied to strike out the claim as being hopeless in law.

First time around, DK won.  But on appeal the claim was re-instated.

This shows the importance of the summary judgment procedure.  It’s not something one can use when faced with a big dispute of fact; for that you need a trial.  If you’re going to try to strike a claim (or a defence) out, you’ve got to show it’s flawed legally.  Not factually.  The factual flaws will be purged via cross-examination.  Even if it’s obvious that a malicious claimant is telling lies, the court won’t kick him out before a pukka trial, with the appurtenances of swearing in, evidence rules, big coat of arms behind the judge and so on.  It will not have mini-trials.  Not least because that may result in the same people giving the same evidence loads of times.

So DK had to show that the bankers’ claim was flawed on a legal basis.  Which was very difficult.  As it turned out, too difficult.  What DK was saying is that the contracts showed the bonus was discretionary and the letters that went out in December 2008 showed the bonus was discretionary.  Therefore the employees had no expectation of receiving anything; the answer to “what bonus will you receive?” was not “£x”, but “I am told it will be £x, but that’s subject to various things.”  Without that number being definite, there’s no contractual  promise, no entitlement and no claim.

On the face of it, that’s fairly sound.  But bonuses have to be paid according to contracts – and that includes properly considering whether an employee is entitled to a bonus.  If you stick in the contract a possible bonus, you can’t just ignore it; you have to think about whether to pay one and, if so, how much.  And that means you have to consider it fairly; you can’t decide not to pay Mr X a bonus just because he’s a ginge.  That’s an improper consideration and you’re in breach if you take that into account.

And these considerations are often considerations of fact.  The sort of thing that has to be proved in the crucible of the witness box.

Which is what the Court of Appeal looked at.  Had DK promised, at the “town hall” meeting, to pay bonuses?  Dunno, you’ll need witness evidence for that.  Were the reductions applied to the “promised” bonuses bona fide deductions that could be made under contract?  Dunno, you’ll need witness evidence for that.  Does the announcement of a guaranteed minimum bonus pool mean it all has to be paid out to the members?  Dunno, you’ll need witness evidence for that.   Was there consideration given by the employees in staying on when led to believe they’d receive a bonus?  Dunno, you’ll need witness evidence for that.

Not surprising therefore that the Court of Appeal re-instated the claim.  Too much had to be said in the witness box.  The claim has lots of legal trickiness and factual exploration in it – it is not something that can be slung out early doors as being hopeless.  If anyone’s going to say it’s hopeless, that’s the job of the trial judge.

Thursday, 17 March 2011

Ellaway v IBC Pension Trustees Ltd 80200/1, 80201/1, 80202/1, 79406/1: showing your working

Slightly unusual one this time; not a Court case, but an Ombudsman case.  The Pensions Ombudsman.  Tony King holds the current role, which is to be a quasi-informal adjudicator of disputes involving pensions.  Pensions are complex things, legally.  There’s a chunk of money that needs to be used to give pensions to pensioners.  Who actually owns it?  Well, a pension is a form of trust; someone (usually an employer) sets up the trust, pays money into it, offers membership to people (usually employees) who will also contribute on the promise they will get a pension one day, when they retire or when they’re too ill to work, with maybe a surviving partner's or dependent's pension thrown in.  The hows and whens of getting a pension are set out in the trust document, and the trust takes the money paid in and invests it; the trust owns the assets, and the trustees control the trust.  That way, you have two layers of ownership.  The investments – usually stocks, gilts and property – are legally in the hands of the trustees who do the buying and selling; the beneficial interest is owned by, well, no-one’s quite sure, but it’s a mishmash of those receiving a pension, those who are paying into the trust – usually called a pension scheme or pension plan – and the employer.

If you have a problem with your pension scheme, you complain to the trustees (the people who “own” the pension scheme money and look after it for the pensioners past, present and future), they have to consider it, and if they reject your complaint you can take it up with the Ombudsman.  Quite an important tribunal, although it can be appealed – quite easily – to the High Court; that however puts you on a big costs risk if your appeal doesn’t win.  Unlike before the Ombudsman, which is free to consumers, and where there are no costs awards.

Many complaints are about maladministration; trustees not awarding paying out a pension properly, putting the scheme money on Saucy Sue in the 3.15 at Kempton Park, that sort of thing.  One thing the Ombudsman is keen to emphasize is that trustees give reasons for their decisions.  Trustees may have acted properly in what they do, but if they don’t show their working, how can you tell?

One previous Ombudsman, Dr Julian Farrand, was quite an interventionist chap.  Trusts often give quite a bit of discretion to the trustees as to investing and paying pensions.  And Dr Farrand often disagreed with how trustees did this sort of thing.  What’s more, he would use his position to impose his decisions on the trustees.  The High Court squished this; Dr Farrand may be quite right to think the trustees got it wrong, it said, but he cannot interfere unless the trustees’ decisions are completely mental.  The fact that Trustee A would refuse an ill health benefit, for example, and Trustee B would not does not make either trustee wrong. 

So it’s quite difficult to challenge trustee decisions.  But one way in which you can do so is if the trustees do not give reasons for their decision.  It’s not a big step to go from there to say “the decision MUST be mental, the trustees won’t tell me why”. 

And classically these decisions involve families.  The recent decision regarding Mr Ellaway’s pension is a case in point.  Mr Ellaway worked for IBC Vehicles and was a member of its pension scheme.  Sadly he never enjoyed a pension as he died whilst still working.  The IBC scheme’s trust said that, in these circumstances, the scheme would pay a lump sum to a beneficiary.  It was up to the trustees to decide who the beneficiary should be. 

The trustees had a choice; Mr Ellaway left his parents, a sister, brother and niece.  He was not married, but he was engaged; he had moved in with his fiancée just 8 weeks before he died.  So, on the face of it, a choice of six.

The trustees therefore looked at the evidence available to them of what Mr Ellaway would have wanted.  However there was no will.  There was also no “expression of wish” form, a document employees usually sign telling trustees where they would want a lump sum paid.  So the trustees did some digging, and found out about Mr Ellaway’s wedding plans.  They decided that the lump sum should go to Mr Ellaway’s fiancée.

Sensible enough?  Not for Mr Ellaway’s mother, siblings and niece.  They complained to the trustees and, when they rejected the complaint, to the Ombudsman.  The big problem was not the decision itself, but how the trustees had gone about it.  The trustees had investigated, true; they had even visited the other Ellaways and fiancée.  The problem was that the trustees did not tell the Ellaways why they were visiting – the Ellaways thought it was just to get bank details and so on for the payment.  Had they been told it was an information gathering exercise, they could have given some information that was relevant – such as the Ellaways being financially dependent on Mr Ellaway.

The Ombudsman looked at the decision-making procedure.  The trustees had not given reasons.  Not full ones, anyway.  They had not told the Ellaways what and why they were investigating.  They had not dug out much written evidence.  There was also a problem as to whether the fiancée fell within the category of beneficiaries; as she wasn’t family (yet), she needed to be financially dependent, and that was dubious, given they’d been living together for two months and kept bills separate.   The trustees had concluded that the fiancée was the best recipient, which is fair enough; but they hadn’t concluded she was an eligible recipient.  They’d taken that as read.

So the Ombudsman kicked it back to the trustees.  He didn’t overturn the decision, because the fiancée wasn’t part of the complaint (indeed she’d already received the money – such is the glacial pace of these things, she had received it back in 2007, in fact); he just said that the trustees had to work out whether she could be a beneficiary, and then, having done that, whether she was the best recipient.  And if not, to pay a lump sum to whichever beneficiary the trustees saw fit.  It may be that the trustees come to the same conclusion again, but they have to get the reasons right.  Had they shown their working – written down that the fiancée was dependent, giving the reasons why – they’d’ve gotten away with it.

Wednesday, 9 March 2011

Mann v Portugal and the United Kingdom [2011] ECHR 337 (1 February 2011): European Court of Human Wrongs

I mentioned before the European Court decision in Hirst, which has caused controversy and which has already been distinguished by an English judge.  If that decision was controversial, this one is shocking, disgraceful and a positive affront to justice.

Portugal hosted the European football championships in 2004.  Paranoid about hooliganism, it brought in a system of fast-track trials to deal with violence.  One such fast track trial was that of Garry Mann.  He was put on trial for hooliganism, convicted and imprisoned for 2 years, suspended while his appeal went forward; in the meantime, on the advice of the British consul, who said he wouldn't be sent down back home, he returned to England.  Five years later the Portuguese sought to extradite him to serve his sentence; his lawyers had forgotten to appeal, and the Portuguese learned Mann had not been serving his sentence in Britain.

Serves him right?  A convicted hooligan?  Well, not when you consider the trial.  Conducted in Portuguese, there were two interpreters between fourteen defendants; one of the interpreters was a hairdresser who spoke a smattering of English.  Mann had five minutes to prepare for his trial with a lawyer he didn’t know.  He had witnesses who could have proved his innocence, but in those five minutes they could not be found.  CCTV footage would also have shown he was not involved, but again five minutes was insufficient time to dig it out.

No wonder Moses J criticized the trial, and the extradition proceedings, in the most vehement terms.  But given the European Arrest Warrant and the European fiction that such a trial in Portugal was just as valid and binding as a proper trial with proper procedures, he could not do anything to prevent the extradition.  Mann, a patently innocent man, was returned to Portugal to serve his sentence.

Still, he would be able to bring a claim against the Portuguese government for breach of his human rights, wouldn’t he?  Pretty blatantly unfair trial.  Er, no.  In a decision that has just been published, the European Court of Human Rights rejected his complaint as inadmissible.  Because it was too late.  He should have brought it within 6 months of his trial in Portugal, not 6 months of his extradition.

6 months of his trial.  A trial where he didn’t know what was going on; where he left his appeal in the hands of his lawyer (who comprehensively naused it up by cocking up the paperwork).  And following which the British consul told him to forget about it as he could serve the sentence in England – where it would be commuted to nothing.

What’s more, the European Court held that there was insufficient evidence that the trial was unfair.  Insufficient evidence?  One English judge stated that “in circumstances that were so unfair as to be incompatible with the applicants’ right to a fair trial”.  Another stated that it was an embarrassment and a serious injustice.  A police observer described it as a farce.  All findings which the Portuguese authorities did not challenge.  Yet the European Court did not consider this sufficient evidence.  In part because the judges couldn’t agree on just how unfair the proceedings were…

So now we know why the European Court of Human Rights wants to give prisoners the vote.  It is quite happy to see the innocent sent there.

Saturday, 5 March 2011

Aviva Insurance Limited v Roger George Brown [2011] EWHC 362 (QB): overclaiming

How tempted have you been to inflate an insurance claim?  Someone bumps your Romanian rotbox in a car park and you claim it was a concours condition Corniche?  That carpet paint got spilt on was genuine Bukhara silk?  Don’t be led into it.  If you claim too much on your insurance, not only do you not get the inflated amount, you don’t even get your genuine amount.
A lesson Mr Brown learnt to his considerable cost.  Even worse for him was that he got somewhat messed around by Aviva beforehand.  Simple enough background; he owned both halves of a semi, living in one, renting the other.  Got insurance underwritten by Aviva.  The bit he lived in however suffered from subsidence.  He made a couple of claims, the last one in 1996.
Yes, 1996.  It's back to the days of Bleak House.  By 2000 everyone had agreed that serious work needed to be done.  Mr Brown said he would have to move out as the dust would aggravate his asthma.  Policy small print suggested he could stay in “equivalent” accommodation.  And this is where it all went seriously wrong.
What was equivalent?  Mr Brown said it had to be basically what he had.  Six bedroom house in an expensive area of London.  With room for four cars and a yacht.   But Aviva dragged its feet.  An unending liability to pay six grand a month minimum?  Aviva dragged its feet so much Mr Brown dragged Aviva to the Financial Ombudsman Service.  Successfully.
Even then, Aviva failed to play ball.  By 2007 the rent for an equivalent was 10 k per month.  Aviva refused to pay it.  So Mr Brown came up with an alternative idea.  He’d move next door.  The tenants in the other half of the semi had moved out, so Mr Brown would move in.
Now, Mr Brown, strictly speaking, didn’t own next door.  His letting company did.  He did own the letting company though.  Essentially, he instructed the letting company to charge the appropriate rent.  Seven and a bit thousand per month.  Which now was charged to him; and he charged it back to Aviva.  They agreed to pay the rent, and everything was tickety-boo.
Until mid-2008.  Aviva did a bit of investigation behind the rental company to which it was paying £1,700 per week.  And discovered a familiar name as the director.  Aviva therefore stopped payment.  It was not going to cover the cost of Mr Brown living at home.
Aviva went further.  Evidently aggravated by Mr Brown’s constant complaints of late payments and insistence Aviva stick to the terms of the policy and the FOS judgment – how dare he insist on his legal rights? – Aviva sued for the payments it had made.  Over £200k.  Not just the rent, but the repair costs of the other half of the semi.  On the basis that Mr Brown had misled them over the rent – and, if you lie on one claim, you lose all of them.
Aviva claimed 22 separate fraudulent statements, ranging from how much it would cost for Mr Brown to go back to his mum’s old house through to him chasing Aviva because his landlord (himself) was threatening him.  Were they fraudulent?  It depended on Mr Brown’s state of mind.
The judge looked at the evidence.  In the end he decided that Mr Brown had done nothing really wrong in renting his own house.  He’d been honest enough over it, he had sought legal advice as to whether he could rent from himself, there was evidence that, for tax reasons, he had to pay a market rent for it.  Just so happened that he would get it reimbursed by Aviva.  That was OK, there was no need to tell Aviva the full SP – it was a proper rent which he would have received anyway, had he found a tenant, and which Aviva would have had to pay, had Mr Brown found somewhere else to live.
The judge did however find against Mr Brown on another point.  He owned his mother’s former house and was thinking about moving in there, and charging Aviva rent for it.  In the end he didn’t go through with that one; but he had told Aviva he had handed the house over to a trust, hence the need to pay rent.
The judge found this was fraudulent.  Mr Brown knew he hadn’t given it to a trust.  What’s more, he had signed off a witness statement which said he had just been thinking about giving it to a trust.  Contradiction.
The consequences for Mr Brown were severe.  Even though his statement had not actually led to him receiving any payment, even though he would have been entitled to payment for repair and rent anyway, even though he had been messed around for years and years by Aviva, even though moving next door meant Aviva paid out less than had Mr Brown moved elsewhere, Mr Brown lost.  He had to repay all the repair charges and all the rent (which he had paid himself, so not THAT bad).  But the repairs were the bulk of the claim - £175k – and he’s out of pocket for all of that.  Why?  Because insurance contracts are all or nothing.  Lie on one bit, and you lose even your genuine claim.  This is an age-old principle to try to dissuade fraudulent claims.
It looks to me that this one is particularly harsh; even the judge thought it was.  Even if we go with the statement being fraudulent, rather than “merely” being sharp, it made no difference at all to the validity of the rest of the claim.  What’s more, Mr Brown was in these straits because Aviva was refusing to comply with the policy, and even with the FOS ruling.  Could that have been some sort of mitigating factor?  It doesn’t seem to have been addressed.  The judge seems to have been constrained by precedent, but there’s surely some wiggle room – a lack of causation, for instance.   Had Mr Brown never mentioned his mum’s old gaff Aviva would have had to pay what they did anyway.

So, if you a drunken party guest slashes your painting, and you claim it’s a Monet, you won’t get payment – even if it’s a Manet.

Thursday, 3 March 2011

Tovey & ors v Ministry of Justice [2011] EWHC 271 (QB): the wrong to vote

John Hirst is scum.  Not long after serving a five stretch for arson, he bludgeoned his landlady to death with an axe.  Sentenced to 15 years inside.  In the end he served 25 because he continued to offend behind bars.  So what do you do with someone like that?  If the European Court of Human Rights has its way, give him the right to vote.  Just because he has committed brutal crimes doesn’t mean he shouldn’t be allowed to influence the laws he has no intention of obeying.

This is a slightly controversial decision.  To say the least.  Despite having had five years (and counting) to follow the ECtHR’s recommendation, Parliament has not repealed the long-standing statutory ban on prisoner voting.  Indeed, Parliament has voted near-unanimously to ignore the ECtHR decision; legal advice to the Government suggests that the Government can ignore the decision …

There is a belief that ECtHR decisions bind the courts in Britain.  This is not true; one of the ironies about the implementation of the Human Rights Act 1998 – bringing ECtHR jurisprudence into British jurisprudence – is that it mandates the Supreme Court to consider the decisions from Strasbourg.  Not follow.  ECtHR decisions do not bind.  Lord Phillips was clear; there will be occasions when the domestic court “has concerns as to whether a decision of the Strasbourg court sufficiently appreciates or accommodates particular aspects of our domestic process”.  Or, in less polite terms, the ECtHR goes barmy.

Rare occurrences, says Lord Phillips; however they seem to be becoming a bit more common.  The Al-Khawaja case for example.  An ECtHR decision that states convictions are unsafe if based on evidence that the defendant cannot cross-examine.  All well and good, one wants to have a fair trial, after all; but Mr Al-Khawaja could not cross-examine the victim because she had committed suicide.  Does this mean that a defendant can get away with murder by murdering all the other witnesses pre-trial?  It’s fair to say the ECtHR had not really thought it through.

And didn’t the Supreme Court let them know it.  In R v Horncastle, the defendants sought to have their convictions quashed as they were found guilty largely (or solely) based on dead or scared (or dead scared) witnesses.  The same set of facts in Al-Khawaja.  The Supreme Court – in a seven-judge unanimous decision – ripped into the ECtHR.  Phillips LJ pointed out a few areas in the Al-Khawaja case where Strasbourg had gone wrong.  Common law protected this sort of evidence looooong before the ECtHR was a twinkle in a jurist’s eye.  Parliament has amended and secured those protections over the years.  Strasbourg recognizes that there are some exceptions allowed to the right to cross-examine a witness; however Strasbourg has confused itself up its own fundament.  And so on and so on.  One of the nine – nine! – separate grounds on which the Supreme Court found that the ECtHR was very, very wrong was that the continental judges worked in jurisdictions that did not have the same protections in place…

So, back to Hirst.  The ECtHR has basically told Parliament to amend the law.  Parliament has thus far refused to do so.  That means prisoners are lining up to have a go.  One claim has already been heard in Court.  Can’t lose, based on Hirst?  Can lose, based on Horncastle.  And did lose.  Doesn’t help that the lead claimant (a Mr Hydes, taking over from a reluctant Tovey) decided that he didn’t actually want to appear in Court, and turned down the chance for a day pass to present his case.  Even without the proponent of the case, the Court proceeded.  It looked at the law; the statute banning prisoners from voting could not be interpreted in a Human Rights Act-friendly way, so banning Hydes from voting couldn’t be twisted as a breach of English law.  The ban was 100% compliant with English law.  So the only way out was to take it to Europe.  Compensation?  No.  There was no compensation payable for not giving him that right – even the ECtHR had not gone that far.  Claim dismissed.

The claim may yet go further, but we are entering into interesting constitutional grounds here.  The Supreme Court has expressed trenchant criticism of the ECtHR.  Hoffman LJ, not generally considered the most conservative of judges, has been scathing in some of his comments as to the intellect of the European judges; difficult to disagree when one stated that it's effectively a human right to break an unpopular law if a lot of people do it – which would make murder legal in some parts of the world.  There have even been judicial comments that some of the ECtHR judges don’t understand basic principles like precedent.  With a Supreme Court openly contemptuous of Strasbourg jurisprudence, and a British court system seemingly more willing to “take account” of ECtHR decisions only to use them as snotrags, surely there must be a concern that the ECtHR will end up harming its own raison d’etre.  How can the ECtHR improve human rights in places that genuinely need improvement, when its decisions are becoming more and more divorced from reality?