16 April 2018

Background

The proceedings concerned the jurisdiction of the High Court to approve the variation of a trust in circumstances where one of the beneficiaries  was an autistic minor.

Under s 1(a) of the Variation of Trusts Act 1958 (VTA 1958), the High Court had the power to approve a variation of a trust on behalf of, among others, ‘any person having, directly or indirectly, an interest, whether vested or contingent, under the trusts who by reason of infancy or other incapacity is incapable of assenting’.

 In the case of certain persons suffering from mental incapacity, within the meaning of the Mental Capacity Act 2005 (MCA 2005), the question as to whether the proposed variation of a trust was for their benefit was to be determined by the Court of Protection, rather than by the High Court. In that regard, VTA 1958 s 1(3) provided that: ‘the jurisdiction conferred by subsection (1) of this section shall be exercisable by the High Court, except that the question whether the carrying out of any arrangement would be for the benefit of a person falling within paragraph (a) of the said subsection (1) who lacks capacity (within the meaning of the Mental Capacity Act 2005) to give his assent is to be determined by the Court of Protection’.

In the present case, the adult beneficiaries under a trust had consented to its proposed variation and sought the court’s approval on behalf or three of its beneficiaries who were minors, and also in respect of unborn and unascertained beneficiaries who could be affected by the variation. One of the minor beneficiaries (X) was aged ten and severely autistic.

An issue arose, concerning the true construction of VTA 1958 s 1(3).

Issues and decisions

Whether a minor who was a beneficiary under a trust, but who had a mental incapacity, for the purposes of MCA 2005 s 2(1), was a person within VTA 1958 s 1(3), such that the question as to whether the proposed variation was for his benefit should be referred to the Court of Protection.

On its true constructions, s 1(3) applied to a person where the impairment etc was the single or only reason for the lack of capacity to consent. That requirement was not met where there were argued to be two reasons for the lack of capacity (see [20] of the judgment).

VTA 1958 s 1(1)(a) referred to ‘infancy or other incapacity’. That showed that ‘infancy’ was treated, for the purposes of the VTA 1958, as producing a state of incapacity. The application of MCA 2005 2(1) was issue specific. A person might have capacity in relation to some matters and not in relation to others (see [16], [17] of the judgment).

Accordingly, in the case of a beneficiary who was under 18, the question as to whether the proposed variation was for his benefit would always be a matter for the High Court. That would be the position even if that person was nearly 18 and lacked capacity in relation to other matters within MCA 2005 s 2(1). The position would be the same even if that person’s circumstances had been considered in other respects by the Court of Protection and a deputy had been appointed in relation to that person (see [27] of the judgment).

The court ruled:

On the ordinary and literal reading of VTA 1958 s 1(3), taken together with MCA 2005 s 2(1), X was not able to assent to the variation by reason of being a minor. His inability was not by reason of another incapacity and was not because of an impairment or disturbance of mind or brain. It followed that, applying the literal reading of VTA 1958 s 1(3) to the case of X, that section did not require the present court to refer to the Court of Protection the question as to whether the proposed variation was for the benefit of X ( see [19], [21] of the judgment).

Saunders v Vautier 49 ER 282 considered; Chapman v Chapman [1954] 1 All ER 798 considered; Goulding v James [1997] 2 All ER 239 considered.

William Massey QC (instructed by Birketts LLP) for the claimant.

Georgia Bedworth for the minor beneficiaries.

James Rivett (instructed by Birketts LLP) for the trustees.

Carla Dougan-Bacchus Barrister.

On its true construction, s 1(3) of the Variation of Trusts Act 1958 applied to a person where the impairment etc was the single or only reason for the lack of capacity to consent. Accordingly, in the case of a beneficiary who was under 18, the question as to whether the proposed variation was for his benefit would always be a matter for the High Court. That would be the position even if that person was nearly 18 and lacked capacity in relation to other matters within s 2(1) of the Mental Capacity Act 2005. Applying that construction, the Chancery Division ruled that a beneficiary of a trust (X), who was an autistic minor, was not able to assent to the variation of the trust by reason of being a minor, not because of an impairment or disturbance of mind or brain. Accordingly, the court held that s 1(3) did not require it to refer to the Court of Protection the question as to whether the proposed variation was for the benefit of X.

Background

The parties were two companies. In May 2016, they became parties in a contract, under which the claimant (Gosvenor) was to perform work for the installation of a facade at a hotel in Southampton. The defendant (Aygun) was a sub-contractor to the main contractor. The project fell into delay and, in September 2017, the parties entered adjudication. Aygun submitted that Gosvenor’s claim was largely based on forged invoices. In November, the adjudicator found for Gosvenor in the sum of £553,958.47. Gosvenor applied for summary judgment to enforce the adjudicator’s decision. Aygun resisted the application, and submitted that Gosvenor’s claim was largely based on forged invoices. It applied for a stay of execution. In February 2018, a draft judgment was made and circulated to the parties. Only after the making of the draft judgment did Gosvenor put in any evidence.

Issues and decisions

(1) Whether Gosvenor’s application for summary judgment succeeded.

It was extraordinary that, given the seriousness of the allegations made against it, Gosvenor had chosen not to put in any evidence in response for the hearing of February 2018. However, a distinction had to be made between fraudulent behaviour, acts or omissions which had been or could have been raised as a defence in the adjudication and such behaviour, acts or omissions which neither had been nor could have been reasonably raised, but which had emerged afterwards. That was a major obstacle to the majority of the allegations raised by Aygun. None of the factors raised by Aygun was sufficient to surmount the basic hurdle that Aygun could have and should have deployed the appropriate evidence at the adjudication, had it organised its defence to the claim properly (see [21], [22] of the judgment).

The correct result on the application for summary judgment of the decision itself was to grant that application (see [25] of the judgment).

SG South Ltd v King’s Head Cirencester LLP [2009] All ER (D) 120 (Nov) considered; Speymill Contracts Ltd v Baskind [2010] All ER (D) 285 (Feb) considered; GPS Marine Contractors Ltd v Ringway Infrastructure Services Ltd [2010] All ER (D) 232 (Oct) considered.

(2) Whether, on the event of Gosvenor’s application succeeding, Aygun’s application for a stay of execution should be allowed.

The principles that governed the exercise of the court’s discretion when considering a stay of execution in adjudication enforcement proceedings (see [36] of the judgment) needed to be amended. To those principles, a new principle (g) had to be added, which stated: ‘if the evidence demonstrates that there is a real risk that any judgment would go unsatisfied by reason of the claimant organising its financial affairs with the purpose of dissipating or disposing of the adjudication sum so that it would not be available to be repaid, then this would also justify the grant of a stay’ (see [39] of the judgment).

Such a feature was likely to arise in only a very small number of cases, and in exceptional factual circumstances. That addition to the principles was not intended to re-open the issue of the basis on which stays of execution would be ordered in adjudication enforcement cases, or to define a specific, exhaustive and close set of circumstances that could constitute ‘special circumstances’ in the terms of CPR 83.7(4). In the vast majority of cases, the existing principles would suffice and recourse to principle (g) would be extremely rare (see [40] of the judgment).

In order for the evidence to fall into that category, the standard was broadly the same as that necessary to justify the granting of a freezing order (see [40] of the judgment).

The addition of the further principle was not designed to prevent a claimant from dealing with the adjudication sum in the ordinary course of business, or make evidence of what a claimant might be intending to do in the future, in the ordinary course of business, relevant or admissible under that head. The whole purpose of adjudication decisions being summarily enforceable would be frustrated if all a winning party in an adjudication could do with any payment was to place it in an account, and not use it, to avoid the risk of a stay of execution being ordered. That was not the purpose of principle (g) (see [40] of the judgment).

On the evidence, there was suspicion about the financial affairs and probity of Gosvenor (see [33] of the judgment).

The clear and inevitable inference was that Gosvenor (or those who controlled it) had specifically organised its financial affairs, other than in the ordinary course of business, to ensure that the adjudication sum paid to it would be dissipated or disposed of so that any future judgment against it would go unsatisfied. That justified the grant of a stay of execution (see [43] of the judgment).

Gosvenor was entitled to summary judgment on the sum awarded to it by the adjudicator. Aygun was entitled to a stay of execution in respect of the judgment sum (see [62] of the judgment).

Wimbledon Construction Co 2000 Ltd v Vago [2005] All ER (D) 277 (Jun) applied; LXB RP (Crown Road) Limited v Squibb Group Limited (2016) [2016] EWHC 2669 (TCC) considered; Equitix ESI CHP (Wrexham) Ltd v Bester Generacion UK Ltd [2018] All ER (D) 57 (Feb) considered.

Helena White (instructed by Womble Bond Dickinson (UK) LLP) for Gosvenor.

Timothy Sampson (instructed by Arlington Crown) for Aygun.

Toby Frost Barrister.

The claimant’s application for summary judgment in a construction dispute succeeded. However, the defendant company’s application for a stay of execution was also successful. The Technology and Construction Court added a new principle to the principles that governed the exercise of the court’s discretion when considering a stay of execution in adjudication enforcement proceedings, as set out in the case of Wimbledon Construction Co 2000 Ltd v Vago[2005] All ER (D) 277 (Jun).

Background

The defendants were Albanian nationals who claimed to have been victims of trafficking. The defendant in the first action, MK, was convicted of conspiracy to supply a class A drug (cocaine) and of being in possession of an identity document with improper intention. The defendant in the second action, PG, was convicted of a single count of possession of an identity document with improper intention. The defendants sought to rely on the statutory defence afforded to victims of trafficking under s 45 of the Modern Slavery Act 2015 (s 45).

The judges concluded that, first, a defendant bore an evidential burden to raise the issue whether she was a victim of trafficking or slavery. Second, having successfully done so, it was for the prosecution to prove, beyond reasonable doubt, that she was not. Third, if the prosecution succeeded in that, the s 45 defence would not avail the defendant. Fourth, however, if the prosecution failed in that respect, the legal or persuasive burden of proof in respect of the other elements of the defence fell on the defendant. Therefore, if the defendant was over 18 years old, she must prove on the balance of probabilities that: (i) she was compelled to commit the offence; (ii) the compulsion was as a direct consequence of her being or having been a victim of slavery or relevant exploitation; and (iii) a reasonable person in the same situation as her and having her relevant characteristics would have no realistic alternative to doing the act which constitutes the offence. MK appealed against her conviction and her sentence, and PG appealed against her conviction.

Issues and decisions

(1) Whether the legal (or persuasive) burden of proof rested on the defendant when a defence was raised under s 45, or whether the defendant bore only an evidential burden with the prosecution having to disprove to the criminal standard one or more of the elements of the defence.

Even if the prosecution had proved the ingredients of the criminal offence to the criminal standard, s 45 stated that a person ‘is not guilty’, and so was innocent of the offence, if all the specified elements under s 45 were established. That was the language of a defence, not an excuse or proviso. The status of a person as a victim of trafficking or slavery did not automatically exempt her from criminal liability, or permit the commission of acts that would otherwise be criminal. The opening words of the section were a strong indication that imposing a reverse legal or persuasive burden would be tantamount to requiring a defendant to prove specific elements establishing her innocence (see [25] of the judgment).

While it was correct to say that the defence was only available to a person who was or had been a victim of slavery or human trafficking, the structure of s 45 only introduced that issue at a later stage of the analysis: in the case of an adult defendant, after it had been established that the person was aged over 18 and that they had done the act which constituted the offence under compulsion. It was s 45(1)(c) which posed the question whether the act done under compulsion had been a direct consequence of the person being or having been a victim of slavery or human trafficking (see [26] of the judgment).

That subsection raised two issues, namely: (i) whether the defendant was or had been a victim of slavery or human trafficking; and (ii) if so, whether there was a direct causal link between the defendant’s status as a victim and the act done under compulsion (see [27] of the judgment).

If the legal burden of proof was reversed, there was a danger of frustrating Parliament’s objective that victims (including children) of trafficking or slavery should be protected against the further stigma of a criminal conviction for an offence committed in consequence of their initial victimisation (see [36] of the judgment).  

While, in some cases, it might be that the defendant was best placed to identify the circumstances of her personal situation in order to bring herself within an exception relying on the elements of compulsion (where required), and the direct link between the commission of the act and the defendant’s current or former status as a victim of slavery or trafficking. However, that did not affect the overall question of where the legal burden lay (see [37], [38] of the judgment).

Further, the defence under s 45 was not established solely on the basis of evidence about what the defendant had done and why the defendant had done it. There was an objective element, set out in s 45(1)(d) (or section 45(4)(c) as applied to a child). That final element of the defence was the safeguard against a defendant being absolved from liability for what otherwise would be a serious criminal offence simply because the jury could not be sure that her account of being exploited and victimised was untruthful. It also served to safeguard against the twin dangers that: (i) the defence under s 45 would be perceived as affording an easy means for an unscrupulous defendant to avoid liability by making up a story about being trafficked or enslaved; and (ii) the apparent ease with which defendants could set up a defence under the section would result in their controllers being encouraged, rather than discouraged, to continue their exploitation, and through them commit offences (see [39] of the judgment).

Furthermore, reversing the persuasive burden on the issue of age would also appear to undermine the approach to child victims required by art 13(2) of Directive (EU) 2011/36. Parliament could not have intended that such a defendant should not have the benefit of any reasonable doubt on the issue of age. As the legal burden of proof in respect of age rested on the prosecution, that was yet another indication that Parliament had not intend to shift the burden of proof of the other elements of the defence under s 45 (see [42], [44] of the judgment).

Section 45 did not bear the interpretation urged by the prosecution upon, and accepted by, the judges below. It did not implicitly require the defendant to bear the legal or persuasive burden of proof of any element of the defence. The burden on a defendant was evidential. It was for the defendant to raise evidence of each of the elements and for the prosecution to disprove one or more of them to the criminal standard in the usual way (see [45] of the judgment).

R v Edwards [1974] 2 All ER 1085 distinguished; Woolmington v DPP [1935] All ER Rep 1 applied; R v DPP, ex p Kebilene [1999] All ER (D) 1170 applied; R v Hunt [1987] 1 All ER 1 considered; R v Lambert [2001] 3 All ER 577 considered; R v Makuwa [2006] All ER (D) 324 (Feb) considered.

(2) Whether the defendants’ convictions had been unsafe.

There was no suggestion by the prosecution that MK’s conviction had been safe if the judge’s direction on the burden and standard of proof was wrong. Therefore, MK’s  appeal would be allowed and the conviction quashed (see [50] of the judgment).

Despite the error in the direction to the jury concerning the burden of proof in relation to s 45, the evidence against PG had been overwhelming and the conviction was safe.  It was fanciful to suppose in her case that the niceties of the legal burden of proof could have made any difference. In those circumstances, the appeal would be dismissed (see [56] of the judgment).

Amjad Malik QC and Glenn Harris for MK.

Andreas O’Shea for PG.

John McGuinness QC and Ben Douglas-Jones QC for the Crown.

Karina Weller - Solicitor (NSW) (non-practising).

Section 45 of the Modern Slavery Act 2015 did not implicitly require the defendant to bear the legal or persuasive burden of proof of any element of the defence. The Court of Appeal, Criminal Division, held that the burden on a defendant was evidential; it was for the defendant to raise evidence of each of the elements and for the prosecution to disprove one or more of them to the criminal standard in the usual way.

Background

In 2001 or 2002, the claimant company built a new science block at a school for its client, a local authority (LCC). The science block, which had been designed by the defendant company, suffered problems with the ingress of water into the building. LCC brought arbitration proceedings against the claimant, which were settled in 2015 on the basis that the claimant would carry out remedial works at its own cost.

In April 2017, the parties entered into a standstill agreement. In September, the claimant issued proceedings against the defendant seeking an indemnity or a contribution of £205,908.60 in respect of the cost of the settlement (the contribution claim).

A preliminary issue arose for consideration concerning limitation.

Issues and decisions

Whether the contribution claim was statute barred pursuant to s 10 of the Limitation Act 1980 (LA 1980), which provided that an action to recover a contribution under the Civil Liability (Contribution) Act 1978 (CL(C)A 1978) could not be brought after the expiry of a period of two years from the date on which such right had accrued. The question was whether time ran, under LA 1980 s 10(4), only once the parties had entered into a ‘binding’ agreement for the payment of compensation, as the claimant submitted, or whether something short of a binding agreement was sufficient to start time running, as the defendant submitted. That question required the construction of s 10(4), which provided that: ‘If, in any case not within subsection (3) above, the person in question makes or agrees to make any payment to one or more persons in compensation for that damage (whether he admits any liability in respect of the damage or not), the relevant date shall be the earliest date on which the amount to be paid by him is agreed between him (or his representative) and the person (or each of the persons, as the case may be) to whom the payment is to be made.’

The claimant submitted that there had been no agreement as to the remedial works until the parties to the arbitral proceedings had signed the settlement agreement on 29 June 2015. Alternatively, that the date of agreement was, in any event, later than 28 April 2015, because the parties had still been negotiating the terms of their settlement throughout April. Accordingly, the claimant submitted, the two-year limitation period had not expired until the standstill agreement and the claim was in time. The defendant submitted that the remedial works had been agreed by 16 April 2015, or at the latest by 27 April of that year. All that had remained to be agreed thereafter had been ancillary matters, which did not prevent time from running. Therefore, the claim had already been statute-barred at the date of the standstill agreement.

On the proper construction of s 10(4), time only started to run from the date of a binding agreement as to the amount of the compensation payment (see [28] of the judgment).

The time for the bringing of a contribution claim ran from the date of the judgment or award where the matter was litigated or arbitrated (s 10(3)). Section 10(3) and s 10(4) were mutually exclusive. Cases in which the underlying dispute was settled fell under s 10(4) and not s 10(3). That remained the case notwithstanding that the parties’ settlement was subsequently recorded in a court order. The court should seek to identify the earliest date of the underlying agreement and not the subsequent date when the consent order was sealed by the court or made by the arbitrator. In cases falling under s 10(3), time ran from the judgment or award which ascertained quantum and not merely an earlier judgment or award establishing liability for damages to be assessed. So too, under s 10(4), there had to be agreement as to the amount of the payment, and not merely as to liability. Equally, time did not run from earlier agreement to pay an interim payment towards a potential liability, but from the date of agreement of the final sum to be paid. The agreement that had to be identified was an agreement for payment for the actual damage caused. The running of time was not further delayed, pending agreement of any ancillary liability for costs. While s 10(4) talked about payment, such term included both monetary payment and payments in kind (see [20], [21] of the judgment).

There could only be one trigger date to start time running under s 10, namely either: the date of the judgment or award requiring a payment in cases where such issue was the subject of a judicial or arbitral determination; or the date of the agreement to make the payment in a case where the issue was compromised. Since there could only be one trigger event, it followed that time could not start to run where the parties reached an unenforceable agreement as to payment. In such a case, the litigation or arbitration remained on foot and time would only start to run under s 10(4) from the date of the subsequent formal agreement or, if the matter could not be agreed, under s 10(3) from the date of the judgment or award (see [26, [27] of the judgment).

The critical matter was whether there had been agreement as to the payment. That had to be the focus of the enquiry and not whether the parties had agreed ancillary matters. Further, the court would want to see evidence of a ‘finalised’, rather than a preliminary agreement; although a binding agreement should be distinguished from an incomplete agreement or an agreement in principle. Ordinarily, parties might not be expected to reach a binding agreement as to payment until they had also agreed the other terms of their settlement. That said, it was beyond doubt that the parties were free to contract on such basis (see [31] of the judgement).

Accordingly, it was open to the parties to reach an immediately binding agreement as to the settlement payment, but leave for later agreement details as to payment terms or any liability for costs. In such cases, time would start to run from the date of the agreement as to the amount of the payment. Equally, it was open to the parties to agree that nothing was agreed until everything was agreed. If so, time would not start to run until the date of the subsequent binding agreement as to the payment or, should agreement prove impossible, the judgment or award (see [32] of the judgment).

The court ruled:

The contribution claim was in time (see [35] of the judgment).

Pagnan SpA v Feed Products Ltd [1987] 2 Lloyd’s Rep 601 applied; Knight v Rochdale Healthcare NHS Trust [2003] 4 All ER 416 applied; Baker & Davies plc v Leslie Wilks Associates [2005] 3 All ER 603 applied; Aer Lingus plc v Gildacroft Ltd [2006] 2 All ER 290 applied; Chief Constable of Hampshire Constabulary v Southampton City Council [2014] All ER (D) 01 (Dec) applied.

Steven Walker QC (instructed by Mills & Reeve LLP) for the claimant.

Lynne McCafferty (instructed by Beale & Company Solicitors LLP) for the defendant.

Carla Dougan-Bacchus Barrister.

On the proper construction of s 10(4) of the Limitation Act 1980, the time for bringing a claim to recover a contribution under the Civil Liability (Contribution) Act 1978 only started to run from the date of a ‘binding’ agreement as to the amount of the compensation payment. The Technology and Construction Court held that, on the facts, the claimant company’s claim for a contribution from the defendant company, following the claimant’s settlement of a construction dispute with a local authority, was not statute-barred.

Background

The respondent company designed manufactured and sold gas detection solutions. The relevant device in the present proceedings was the Gas Alert Micro 5 (the device). The respondent submitted a Binding Tariff Information (BTI) application in respect of the device to the Revenue and Customs Commissioners (HMRC) claiming that, in its view, the product should be classified under sub-heading 9026 8020 90 of the Combined Nomenclature (CN) of the European Union’s Common Customs Tariff (CCT). Namely, that the principal function of the device was detection/measurement. HMRC replied, issuing a BTI notification in respect of the device under heading 8531 8095 90 claiming that the principle function of the device was an alarm. The First-Tier Tribunal (Tax and Chancery Chamber) (FTT) classified the device as an alerting device and dismissed the respondent’s appeal against HMRC’s classification. The Upper Tribunal (Tax and Chancery Chamber) (UT) allowed the appeal, holding that marketing materials and the product’s targeted use were not to be taken into account. HMRC appealed. The appeal fell to be determined on an artificial basis between the choice of the two classification headings even though it was common ground that the correct applicable heading was an entirely different one. However the purpose served in the appeal was to be able to refute the claim by the respondent for repayment of customs duty levied on the basis of the device being classified under heading 85318095.

Appeal allowed.

Issues and decisions

Whether the FTT had come to the correct decision.

The FTT had correctly directed itself as to the relevant principles. First, the decisive criterion for the classification of goods for tariff purposes was in general to be found in their objective characteristics and properties. Secondly, the intended use of a product could constitute an objective criterion in relation to tariff classification if it was inherent in the product; and such inherent character had to be capable of being assessed on the basis of the product’s objective characteristics and properties and thirdly the notes to the CN were an important aid for interpreting the scope of the headings, but did not have legally binding force. The FTT had clearly understood that the essential exercise was an objective one; subjective considerations had no part to play. That being so, the task for the FTT was to find and evaluate the relevant facts and to reach its conclusion in the light of the applicable principles accordingly (see [95]-[97] of the judgment).

The UT had made a material error of law in its approach to the decision of the FTT. Once, however, it had been accepted that the FTT had not misdirected itself as to the applicable legal principles, it was difficult to say that the FTT’s evaluation was not one that had been properly open to it or that the UT’s decision was one then open to the UT (see [98], [99], [100], [115] of the judgment).

The question ultimately, as the FTT had rightly appreciated, for the purposes of heading 9026 as compared with heading 8531, was just whether the device was one for measuring or checking the flow etc of liquids or gases. The FTT found that the measuring function was entirely subordinate to the alarm function and on that basis, it did not fall within heading 9026 (see [102] of the judgment).

The fact that the device here  had the capacity to store and record measuring information and the capacity to have the alerting function disabled had not necessarily meant that measurement was one of its intended uses, let alone its principal purpose or intended use. The FTT’s conclusion on the matter was not perverse or was not one that no reasonable tribunal could properly reach. It was a very strong thing to set aside a fully reasoned decision of an expert tribunal on such a basis; and there had been no sufficient justification for doing so in the present case (see [105] of the judgment).

The appeal would be allowed on that basis. The order of the UT would be set aside and the order of the FTT restored (see [106] of the judgment).

Decision of Upper Tribunal  [2017] UKUT 61 (TCC) Reversed.

Kieron Beal QC and Brendan McGurk (instructed by HMRC Solicitor’s Office) for HMRC

Valentina Sloane (instructed by Collyer Bristow LLP) for the respondent.

Tara Psaila Barrister.

The function of the gas detection device manufactured by the respondent company had an alerting function and would be taxed under that heading. The Court of Appeal, Civil Division, held that the First Tier Tribunal’s conclusion on the matter had not been perverse or was not one that no reasonable tribunal could properly have reached.