Law reports

COSTS

Offer to settle under CPR rule 36 including concession as to costs - party gaining more advantageous judgment claiming costs on indemnity basis - terms as to costs not intended to be included in part 36 offerMitchell and others v James and others: CA (Lords Justice Peter Gibson, Potter and Sir Murray Stuart-Smith): 12 July 2002

The claimants brought an action for specific performance of an oral agreement relating to shares in a company.

Before action, the claimants had submitted an offer to settle entitled a part 36 offer, which contained terms as to costs, including that each side pay its own costs.

The claimants succeeded in their claim, and argued that the judgment obtained was more advantageous than the offer and that they should be awarded costs on an indemnity basis pursuant to rule 36.21.

The judge refused.

The claimants appealed.

Peter Brunner (instructed by Cleave Thompson, Alfreton) for Mitchell; Neil Mendoza (instructed by Ward Hadaway, Newcastle upon Tyne) for the respondents.

Held, that it was not intended that terms as to costs be included in a part 36 offer because rule 36.14 was worded as applicable whenever a part 36 offer was accepted without needing permission of the court and did not have wording to indicate that the parties could agree otherwise; that paragraphs 7.2 and 7.5 of the part 36 practice direction were inconsistent with a term as to costs being part of a part 36 offer; that rule 36.21 applied where at trial either a defendant was 'held liable' for more or 'the judgment' against a defendant was more advantageous to the claimant than the offer and those phrases connoted what the trial judge held/decided on the substantive issues in the case as distinct from the ancillary issue of costs to be determined after those issues were decided; that the rule was intended to apply universally at the end of the trial when the judge was required to make an order for costs when there would have been no assessment of the costs, the figure for which would be uncertain; that it was hard to believe that the draftsman contemplated that a part 36 offer was one which included a term as to costs, so that the judge might have to evaluate the quantum of his costs order which was normally the function of the costs judge; that there would be a real risk of abuse if a term as to costs could be included in a part 36 offer; that although nothing in part 36 prevented a party making an offer to settle in whatever way he chose, nothing in rule 36(1)(2) permitted a party to include a term as to costs as part of a part 36 offer for the purposes of obtaining an order for costs on an indemnity basis.

CRIMINAL

Court-martial - civil offence triable - permanent president not compromising independence and impartialityR v Spear and Others: HL (Lord Bingham of Cornhill, Lord Steyn, Lord Hutton, Lord Scott of Foscote and Lord Rodger of Earlsferry): 18 July 2002

The defendants in the first group of appeals were convicted at district court-martial of assaults occasioning actual bodily harm.

They appealed on the ground that they had not had a fair hearing by an independent and impartial tribunal, contrary to article 6(1) of the European Convention on Human Rights, as scheduled to the Human Rights Act 1998, since their court-martial had been presided over by permanent presidents.

The defendants in the second group of appeals contended that the trial of a civil offence, that is to say one mirroring a trial under the ordinary criminal law, by court-martial rather than by the ordinary criminal courts was incompatible with article 6.

The Court-Martial Appeal Court dismissed the appeals.

The defendants appealed.

Lord Thomas of Gresford QC and Gilbert Blades, solicitor (instructed by Wilkin Chapman Epton Blades, Lincoln) for the defendants; Philip Havers QC and Paul Rogers (instructed by the Army Prosecuting Authority, RAF Uxbridge) for the Army Prosecuting Authority (on behalf of Her Majesty); Philip Havers QC and Dingle Clark (instructed by the Royal Air Force Prosecuting Authority, RAF Innsworth, Gloucester) for the Royal Air Force Prosecuting Authority (on behalf of Her Majesty); Philip Havers QC and Hugo Keith (instructed by the Treasury Solicitor) for the Treasury Solicitor.

Held, dismissing the appeals, that trial of civil offences by court-martial was not in itself incompatible with a fair hearing by an independent and impartial tribunal, which depended on whether satisfactory safeguards were in place; that such safeguards, including the oath taken by the members and their duty to observe the judge advocate's directions, were adequate; and that independence and impartiality were not compromised by the presence of permanent presidents, nor by the reviewing authority established by section 16 of and schedule 5 to the Armed Forces Act 1996.

(WLR)

EMPLOYMENT

Claimant submitting medical evidence to tribunal that advised not to attend in support of application for adjournment - tribunal doubting evidence and dismissing claim in absence - tribunal to look to practical solutions when deciding to exercise discretion to adjourn if doubtful about medical evidence Teinaz v London Borough of Wandsworth: (Lords Justice Peter Gibson, Arden and Mr Justice Buckley): 16 July 2002

The claimant brought a claim for racial discrimination and unfair dismissal against the defendant.

He was given a hearing date but applied for an adjournment on the grounds that he could not attend for medical reasons.

He provided a letter from his doctor advising him that he should take time away from work and also that he should not attend the hearing.

The tribunal refused his application on the ground that the claimant had chosen not to attend and dismissed his claim in his absence.

The appeal tribunal allowed his appeal.

The defendant appealed.

Jonathan Swift (instructed by Solicitor to the Council, Wandsworth London Borough Council) for the defendant; the claimant did not appear and was not represented.

Held, dismissing the appeal, that applications to an employment tribunal for adjournment on medical grounds required practical solutions and it was for the claimant to show that his inability to attend was legitimate; that where the tribunal had doubts regarding medical evidence that a claimant had been advised by a doctor not to attend, the tribunal had discretion to call further evidence or to ask the claimant to authorise the other party to gain evidence from the doctor to assist the tribunal to a just result; that a tribunal necessarily did not make an error of law in not doing that as each case rested on its own facts, but applications for adjournments on medical grounds, each with their own circumstances and facts, called for practical solutions; that in the present case the appeal tribunal had not erred in holding that the tribunal, in exercising its discretion to adjourn, had taken into account an unjustified matter, namely its conclusion that the claimant had chosen not to attend; and that accordingly the appeal would be dismissed.

INSOLVENCY

Insolvent company - creditor applying for removal of liquidators - court to perform balancing exerciseAMP Enterprises Ltd: ChD (Mr Justice Neuberger): 25 July 2002

A creditor of a company in creditors voluntary liquidation applied for the removal of the company's liquidators pursuant to section 108(2) of the Insolvency Act 1986.

Michael Roberts (instructed by Hacking Ashton, Newcastle-under-Lyme) for the creditor; Jane Giret QC (instructed by Sprecher Grier Halberstam) for the liquidators.

Held, dismissing the application, that the court had a discretion whether to remove and replace a liquidator; that before it exercised that discretion the court would require good grounds from the person seeking the order; that the court could expect a liquidator to be efficient, vigorous and unbiased in his conduct of the liquidation and it should not hesitate to remove a liquidator who fell short of those requirements; that the court should not shy away from making an order merely because it redounded to the discredit of the liquidator; but, that since it had undesirable consequences in terms of cost and delay, the removal of liquidators should not be regarded as easy; and that, in the circumstances, although the application had been reasonably brought, there were no grounds for removing the liquidators.

PRACTICE

Judicial bias - draft judgment prepared without consideration of counsel's closing submissions - no actual or apparent bias requiring retrialTaylor v Williamsons (a firm): CA (Lords Justice Ward, Tuckey and Clarke): 17 July 2002

On 30 August 2001, the judge, on the trial of a preliminary issue in a professional negligence claim, having completed the hearing of evidence, directed counsel to submit to him in writing their closing submissions by 28 September.

On 27 September, the parties received copies of a draft judgment in the defendant's favour which had been prepared by the judge before he had received or considered counsel's submissions.

Having indicated his intention to recall the judgment for reconsideration, the judge refused the claimant's application for a new trial before a different judge.

The claimant appealed.

Graham Platford (instructed by McKeags, Newcastle upon Tyne) for the claimant; Howard Smith (instructed by Crutes, Newcastle upon Tyne) for the defendant.

Held, dismissing the appeal, that no issue of actual bias arose because the judge's error, although extraordinary, had resulted from a genuine failure of recollection; that the test as to apparent bias was whether the fair-minded and informed observer would find a real possibility or danger of bias; and that, since the judge had immediately acknowledged his error and had been entitled to revisit his judgment to consider points overlooked, no case of apparent bias was made out.

Committal proceedings - county courts - appropriate routes of appealBarnet London Borough Council v Hurst: CA (Lords Justice Simon Brown, Brooke and Dyson): 17 July 2002

The claimant local authority applied for an order committing the defendant to prison for breach of undertakings not to commit specified acts of anti-social behaviour.

The judge in the county court sentenced the defendant to nine months' imprisonment.

The defendant appealed.

Ranjit Bhose (instructed by the Borough Solicitor, Barnet London Borough Council) for the claimant; Steven Woolf (instructed by JD Spicer & Co) for the defendant.

Held, allowing the appeal in part, that the sentence was excessive and, therefore, a term of three months' imprisonment would be substituted for the nine months imposed; that it was necessary to clarify the appropriate routes of appeal from an order made by the judge in a civil court in committal proceedings; that a first appeal from a committal order made by a circuit judge in the county court lay to the Court of Appeal as of right under section 13(2) of the Administration of Justice Act 1960; that an appeal against any order or decision of a circuit judge in the county court in the exercise of jurisdiction to punish for contempt also lay to the Court of Appeal but required permission to appeal; that a first appeal from a committal order made by a district judge in the county court ordinarily lay to the circuit judge in the county court, but exceptionally to the Court of Appeal; that a first appeal from any order of a district judge in the exercise of jurisdiction to punish for contempt followed the same alternative routes, except that permission to appeal was required; and that second appeals from decisions in the county court lay to the Court of Appeal under CPR rule 52.13 but always required permission to appeal.

Security for costs - jurisdiction to order - wide power not to be exercised so as to deny access to courtOlatawura v Abiloye: CA (Lords Justices Simon Brown and Dyson): 17 July 2002

The claimant issued proceedings against the defendant in the county court alleging non-payment of remuneration for work done for a firm of solicitors of which the defendant was the sole proprietor.

The defendant denied the claim and applied for its summary dismissal under the Civil Procedure Rules 1998 (CPR), rule 24.1.

The district judge ordered the action to be stayed if the claimant failed to give security for the defendant's costs, having formed the view that the order would not prevent the claimant from litigating the claim; that the claim had only limited prospects of success; and that the claim had been conducted unreasonably.

The judge dismissed the claimant's appeal against the order.

The claimant appealed.

The claimant in person; David Cook (instructed by Abiloye & Co) for the defendant.

Held, dismissing the appeal, that there was jurisdiction under the CPR to make orders which were tantamount to orders for security for costs outside CPR part 25 (section II), which expressly provided for such orders; that evidence of such jurisdiction could be found in paragraphs 4 and 5 of the practice direction supplementing part 24 and in CPR rule 3.1(3)(5)(6); that before ordering security in any case, whether or not within part 25, the court should be alert and sensitive to the risk that by making such an order it might be denying the party concerned the right to access to the court; but that the factors taken into consideration by the district judge justified the order for security for costs.

REVENUE

Value added tax - postage charge made by mail order company - output tax payableCommissioners of Customs and Excise v Plantiflor Ltd: HL (Lord Slynn of Hadley, Lord Mackay of Clashfern, Lord Hobhouse of Woodborough, Lord Millett and Lord Scott of Foscote): 25 July 2002

The taxpayer company was a mail order supplier of horticultural goods.

It charged for postage and packing, the postage charge being given as 1.63.

VAT was not charged to the customer on that sum.

The company stated in its catalogue that all postal charges would be advanced to Parcelforce on the customer's behalf.

The Customs and Excise Commissioners decided that output tax should be paid on the postage.

An appeal by the company was allowed by the Value Added Tax and Duties Tribunal.

Mr Justice Laws allowed the commissioners' appeal.

The Court of Appeal allowed an appeal by the company.

The commissioners appealed.

Nicholas Paines QC and Peter Mantle (instructed by Solicitor for the Customs and Excise) for the commissioners; Roderick Cordara QC and Perdita Cargill-Thompson (instructed by Dario Garcia) for the company.

Held, allowing the appeal (Lord Mackay of Clashfern dissenting), that the postage element in the postage and packing charge was paid not to or on behalf of Parcelforce but to the company and accordingly was, under section 19(2) of the Value Added Tax Act 1994 and article 11 of the Sixth Council Directive (77/388/EEC), part of the consideration moving from the customer to the taxpayer for the supply to the customer.

(WLR)

Inheritance tax settlor giving husband life interest in settled property - exemption of transfers between spouses applying to prevent charge to tax arising on settlor's deathInland Revenue Comrs v Eversden and Another: ChD (Mr Justice Lightman): 10 July 2002

Under a discretionary settlement, a cottage was transferred by the settlor to trustees to be held as to 5% for herself and 95% on the trusts of the settlement.

The trustees, having powers of advancement to a class of beneficiaries including the settlor, were to pay trust income to the settlor's husband.

The settlor and her husband lived in the cottage until his death in 1992.

Thereafter it was sold, the trustees acquiring a new property in which the settlor lived until her death in 1998.

Notices of determination to inheritance tax were served on the executors of the settlor's will.

The executors' challenge, relying on section 18 of the Inheritance Tax Act 1984 (transfer between spouses) to provide an exemption from liability under section 102(3) of the Finance Act 1986 (reservation of benefit), was upheld by a special commissioner.

The revenue appealed.

David Ewart (instructed by the Solicitor, Inland Revenue) for the Revenue; Andrew Thornhill QC and Jeremy Woolf (instructed by Triggs Wilkinson Mann) for the executors.

Held, dismissing the appeal, that the settlor's entitlement under the settlement as a discretionary beneficiary constituted a reservation of interest for the purposes of section 102(3) of the Finance Act 1986; that section 18 of the Inheritance Tax Act 1984 exempted transfers between spouses; and that, notwithstanding his death, the settlor's gift to her husband of a life interest in possession had the effect, because of the exception provided for in section 102(5)(a) of the 1986 Act, of preventing the settled property becoming liable to charge on the settlor's death.

SOCIAL SECURITY

Shared care agreement of son between father and former wife - secretary of state refusing to exercise discretion to share child benefit between parents - no breach of convention rightsR (Barber) v Secretary of State for Work and Pensions: QBD (Sir Richard Tucker): 17 July 2002

The claimant and his former wife had a shared care agreement whereby their son spent an equal amount of time with each of them.

The claimant made a request to the secretary of state that he should exercise his powers under regulation 34 of the Social Security (Claims and Payments) Regulations 1987 so that child benefit would be shared between the two parents.

The secretary of state declined to do so.

The claimant sought judicial review of that decision.

Richard Drabble QC and Daniel Kolinsky (instructed by the Public Law Project) for the claimant; Jason Coppel (instructed by Solicitor, Department for Work and Pensions).

Held, dismissing the claim, that the purpose of regulation 34 was to enable the secretary of state to ensure that benefit was paid to someone other than the parent where it appeared necessary to do so in order to protect the interests of the parent or the child; that it was designed to cover situations where the parent was unwilling or unable to apply the benefit in the interests of the child or squandered it for some other purpose; that the regulation could not possibly be interpreted so as to empower the secretary of state to split or rotate child benefits; that the status of the claimant as a person not currently in receipt of child benefit did not amount to a personal characteristic or represent a status which formed the basis of any discrimination, so there had been no breach of article 14 of the European Convention on Human Rights, as scheduled to the Human Rights Act 1998; and that the secretary of state's policy was legitimate and proportionate and there was no justification for a change in the current system.

TRUSTS

Pension scheme - employer's statutory liability for whole of scheme's shortfall in event of liquidation of employer - lawful to compromise debtBradstock Group Pension Scheme Trustees Ltd v Bradstock Group plc and others: Ch D (Mr Charles Aldous QC sitting as deputy High Court judge): 17 June 2002

An occupational pension scheme was subject to the statutory minimum funding requirements (MFR) imposed by sections 55 to 61 of the Pensions Act 1995, which required periodic actuarial valuations of the scheme.

Where the MFR valuation disclosed a serious under-provision the employer was required to bring the scheme up to at least 90% of the MFR.

If the scheme were wound up or the employer went into liquidation, section 75 created an unsecured non-preferential debt owed by the employer for the whole shortfall.

The scheme was in substantial debt and, since the employers had no prospect of bringing the scheme up to its fully funded state, the group would be forced into liquidation unless the deficit could be compromised so that the trustee would receive only a small proportion of the deficit.

The trustee negotiated a compromise with the employers under which the scheme would be wound up and simultaneously the section 75 debt would be compromised by an immediate cash payment plus deferred consideration.

The trustee applied for directions as to whether the section 75 debt could be lawfully compromised.

Michael Furness QC (instructed by Pinsent Curtis Biddle) for the trustee; Robert Ham QC (instructed by Ashurst Morris Crisp) for the employers; Nigel Inglis-Jones QC and Nicolas Stallworthy (instructed by Nabarro Nathanson) for a representative beneficiary.

Held, that trustees, in the exercise of their powers under section 15 of the Trustee Act 1925, could compromise or otherwise deal with a statutory debt arising under section 75 of the Pensions Act 1995, since having such a power did not offend the mischief of the Act and gave effect to the legislation in the best practical way, consistent with the exercise of the trustees' general powers; and that there was no overriding statutory purpose or public interest in requiring trustees to enforce a claim to a section 75 debt to the point of forcing the employer into liquidation.

The law reports are prepared by the reporters to the Incorporated Council of Law Reporting for England and Wales; telephone: 020 7242 6471; fax: 020 7831 5247; http://www.lawreports.co.ukWLR means that a report has been submitted for publication in the Weekly Law Reports