Law reports

LEGAL UPDATE

Law reports

COMMERCIAL

Insurance policy in respect of goods in transit - goods secured in warehouse over weekend stolen - loss covered

Eurodale Manufacturing Ltd v Ecclesiastical Insurance Office plc: CA (Lords Justices Ward, Clarke and Longmore):

10 February 2003

The claimants dealt in mobile telephones, buying wholesale stock from suppliers and selling them on to meet firm orders from ascertained customers.

On arrival from abroad, the telephones were normally allocated by the claimants to the customers and dispatched to them either immediately or within a few hours of their being placed in secure warehouse premises.

The claimants' insurance policy with the defendants was expressed to provide cover for goods 'during the ordinary course of transit'.

A delivery was made to the claimant's warehouse late on a Friday evening of a bank holiday weekend and, exceptionally, they were secured there until the following Tuesday when the warehouse was opened and many of the telephones were found to have been stolen.

The defendants refused to compensate the claimants for their loss.

The judge held that the loss fell within the terms of the insurance cover and awarded the claimants 339,810.

The defendants appealed.

James Dingemans QC and Tom Poole (instructed by Davies Arnold Cooper) for the insurers; Shantanu Majumdar (instructed by Kidd Rapinet) for the claimants.

Held, dismissing the appeal, that in Crows Transport Ltd v Phoenix Assurance Co Ltd [1965] 1 WLR 383 goods stolen from temporary storage which awaited loading had been held to be 'in transit', everything done thereafter being incidental to that transit; that, giving the words of the insurance contract their natural meaning and in all the circumstances there was no reason for the judge's decision to be overruled; and that, accordingly, the loss sustained by the claimants was recoverable from the defendants.

COSTS

Claims management service for personal injury claims including after-the-event insurance scheme - premium paid to service substantially more than underwriters' fee - whole premium not recoverable in costs from tortfeasor

In re Claims Direct Test Cases:

CA (Lords Justices Brooke and Laws and Sir Anthony Evans):

12 February 2003

Claims Direct operated a claims management service under which claimants with personal injury claims paid a fixed premium for its litigation protection insurance policy, which represented the total price that a claimant joining the scheme would be liable to pay.

Only a small proportion of that premium was paid to Lloyd's underwriters in respect of after-the-event (ATE) insurance, which would provide the insured with an indemnity in respect of his costs in the event his compensation claim was dismissed or discontinued.

Where the claim was successful, the claimant was entitled under section 29 of the Access to Justice Act 1999 to recover any premium for insurance against the risk of incurring costs liability in costs from the tortfeasor.

In several cases, successful claimants sought to recover under section 29 the whole of the premium for their Litigation Protection Insurance Policy.

The tortfeasors' liability insurers challenged their right to do so.

The costs judge directed judgment to be entered in costs for each claimant in respect of recoverable premium in a sum which was less than half of the premium which they had paid to Claims Direct.

The claimants appealed.

Timothy Charlton QC and Nicholas Bacon (instructed by Colman Coyle) for the claimants; Anna Guggenheim QC and Alexander Hutton (instructed by Vizards Wyeth, Dartford, Lamport Bassitt, Southampton, and Carters, Peterborough) and Alan Newman QC and Andrew Neish (instructed by Beachcroft Wansbroughs) for the liability insurers.

Held, dismissing the appeals, that, the obligation which an underwriter undertook under his contract of ATE insurance with the claimant was to provide an indemnity in the event that the claimant's compensation claim was dismissed or was discontinued; that it was inevitable that the costs judge should lift the veil to identify what should truly be treated as the premium; and that, accordingly, the costs had been correct in not automatically equating the premium under the litigation protection insurance policy to the premium, which was recoverable under section 29 of the 1999 Act.

CRIMINAL

Extended sentence - claimant recalled to prison when on licence on basis of risk of further offending - Parole Board entitled to consider hearsay evidence and obliged to release prisoner unless positively satisfied continued detention required in public interest

R (Sim) v Parole Board and another: QBD (Mr Justice Elias): 11 February 2003

The claimant was found guilty of two offences of indecent assault and one of indecency with a child under 14, and was sentenced to an extended sentence of seven-and-a-half years, comprising of a custodial term of 30 months and an extension period of five years.

He was released from prison at the halfway point in the custodial term of his sentence, and was recalled by the home secretary and returned to prison during the licence period.

The claimant referred his case to the Parole Board which refused to direct his release.

The claimant sought judicial review of that decision.

Edward Fitzgerald QC and Kris Gledhill (instructed by Bhatt Murphy) for the claimant; Karen Steyn (instructed by the Treasury Solicitor) for the Parole Board; Nigel Giffin (instructed by the Treasury Solicitor) for the Secretary of State for the Home Department.

Held, dismissing the claim, that a person should not lose his liberty, merely on the basis of the risk of what he might do, without periodic supervision to ensure that the public interest really did require the continuation of such a Draconian sanction, and article 5 of the European Convention on Human Rights required that matter to be kept under consideration; that there was no infringement of article 5(1) when a prisoner on licence was detained, whether following breach of the terms of the licence or because other information raised fresh fears that he might commit further offences, since the causal link between the sentence for the original conviction and the subsequent detention was not severed; that, to comply with article 5, section 44A(4) of the Criminal Justice Act 1991 had to be construed as obliging the Parole Board to conclude that it was no longer necessary to detain a prisoner who had been subject to recall during an extended licence period, unless it was positively satisfied that the interests of the public required that he be confined because of the risk that he might commit further offences, of either a sexual or violent nature, with which the extended sentence was designed to deal; that the Parole Board was entitled to consider hearsay evidence in making its decision; and, that in the circumstances, the Parole Board's decision to continue the claimant's detention was justifiable and involved no unfairness.

CROWN PROCEEDINGS

Crown's statutory exemption from tortious liability for injury suffered by serviceman - substantive limitation of civil rights - serviceman having no civil right to which convention right of access to courts could attach

Matthews v Ministry of Defence: HL (Lord Bingham of Cornhill, Lord Hoffmann, Lord Hope of Craighead, Lord Millett and Lord Walker of Gestingthorpe):

13 February 2003

The claimant brought proceedings for damages in tort in respect of asbestos-related injury following exposure to asbestos dust during service in the Royal Navy between 1955 and 1968.

The ministry, relying on section 10 of the Crown Proceedings Act 1947, denied liability and a certificate was issued under section 10(1)(b) on the secretary of state's behalf stating that, in so far as the claimant's injury was the result of service, it would be so attributable for purposes of pension entitlement.

The judge, determining a preliminary issue, held that section 10 was incompatible with article 6(1) of the European Convention on Human Rights in that it unjustifiably deprived the claimant of the right to sue.

The Court of Appeal [2002] EWCA Civ 773; [2002] 1 WLR 2621 allowed the ministry's appeal.

The claimant appealed.

Richard Gordon QC and Robert Weir (instructed by Bond Pearce, Exeter) for the claimant; David Pannick QC, Philip Sales and Kate Gallafent (instructed by the Treasury Solicitor) for the ministry.

Held, dismissing the appeal, that civil rights within article 6(1) were autonomous, to be regarded for convention purposes and not interpreted solely by reference to domestic law; but in protecting a litigant's right of access, article 6 applied only to the determination of civil rights which could arguably be recognised under national law and where the restriction imposed was procedural or otherwise arbitrarily impeded access; that the Crown's liability in tort in respect of claims concerning the armed services had been consistently precluded at common law and expressly under section 10, where the certification procedure under section 10(1)(b) was activated by the secretary of state; and that, accordingly, in substituting a no-fault system of compensation for a claim for damages, section 10 imposed a limitation which operated not as a procedural bar but as a matter of substantive law under which the claimant had no civil right to which article 6 might apply (WLR).

DAMAGES

Pollution by oil discharge resulting in fishing ban - whelk processor suffering loss of profit because fishermen unable to supply whelks - loss not recoverable so compensation not payable

R J Tilbury & Sons (Devon) Ltd v International Oil Pollution Compensation Fund 1971: CA (Lords Justices Kennedy, Chadwick and Mance): 7 February 2003

The claimant had been buying whelks from local fishermen around Wales for processing and export abroad.

Following a spillage of oil, a fishing ban was imposed to prevent a danger to health arising from the consumption of contaminated fish from the banned area.

As a consequence, fishermen were unable to supply whelks to the claimant and the claimant suffered a substantial loss of earnings.

The claimant claimed compensation for loss of its profit from the International Oil Pollution Fund, pursuant to the transitory statutory provisions in schedule 4 to the Merchant Shipping Act 1995.

The judge held that the loss was not 'damage' within the meaning of section 153 as set out in schedule 4 and that the fund was therefore not liable.

The claimant appealed.

David Westcott and David Grant (instructed by Clarke Willmott & Clarke, Bristol) for the claimant; Julian Flaux QC and David Goldstone (instructed by Clifford Chance) for the fund.

Held, dismissing the appeal, that the statutory scheme was closely focused on physical contamination and its consequences and afforded compensation to those who had suffered a direct loss by reason of the fishing ban; that, although all fishermen prevented by the ban from continuing their fishing had suffered direct loss and were within the scope of the scheme, the claimant's loss, which arose from its inability to carry out processing and packing and deliveries of processed and packed whelks at points far away from the contaminated areas, was secondary economic loss which was outside the intended scope of a statute; and that, accordingly, compensation was not payable.

EQUITY AND SUCCESSION

Trustee responsible for obtaining correct instructions from settlor - trustee exercising power of appointment on basis of mistaken information conveyed by agent - exercise of power voidable

Abacus Trust Co (Isle of Man) v Barr and others: ChD (Mr Justice Lightman): 6 February 2003

The claimant was the trustee of a trust fund.

The settlor instructed the trustee's agent that he wanted to settle 40% of the fund on certain discretionary trusts, but the agent informed the claimant that the proportion was 60%.

The settlor did not challenge the trustee's appointment of 60% on the discretionary trusts.

Nine years later, the claimant received advice that the appointment was open to challenge and applied to the court for a declaration as to the validity of the appointment.

Thomas Dumont (instructed by Browne Jacobson, Nottingham) for the claimant; Nicholas Warren and Emily Campbell (instructed by Hewitson Becke & Shaw, Northampton) for the settlor; Gilead Cooper (instructed by Manches, Oxford) for the sons.

Held, that a trustee when exercising a power should take into account all relevant considerations; that a trustee's exercise of a power could not be challenged on grounds of mistake unless there had been a breach of duty on the part of the trustee in acting on and relying on information provided to him; that a trustee was in breach of his fiduciary duty if he failed to ascertain the correct intention of the settlor by failing to check the information provided to him by his agent; that such a breach would not avoid the exercise of the power ab initio but would render it voidable; and that the claimant's mistake as to the quantum of the appointment, which had resulted from its failure to check the agent's information, was sufficiently fundamental to render the appointment voidable.

Option in will subject to time limit - failure to notify beneficiary of value of land within time limit - time not of essence where no specified consequences for non-compliance, no prejudice and no gift over

Hayward v Jackson: ChD (Mr Justice Lawrence Collins):

18 February 2003

The testator by his will gave the claimant the option to buy part of his farm at the figure set by the Capital Taxes Office as its value for inheritance tax purposes.

The will provided that the executors were to notify the claimant of the option within six months of the testator's death and that if the claimant wished to exercise his right he had a further three months in which to do so.

After the testator's death, there was no notification of the value of the land within the time specified by the will.

The claimant sought a declaration that time was not of the essence and that he could exercise the option at any time until the expiry of a reasonable period after the value had been notified to him.

Nicholas Asprey (instructed by Parker Bullen, Salisbury) for the claimant; David H B Holland (instructed by Battens, Crewkerne) for the defendant.

Held, that, contrary to the decision in In re Avard (decd) [1948] Ch 43, a gift in a will subject to a condition precedent and an option to be exercised within a specified period were treated in the same way; that providing there were no specified consequences for non-compliance, no prejudice to any person and no gift over, the court was unlikely to find that the testator intended the option to fail on the basis that time was of the essence; that, in the circumstances, the time limits in the will were directory in nature; and that, accordingly, the claimant was to have a reasonable time from the date when he was notified of the price in which to exercise the option (WLR).

FAMILY

Human fertilisation - child conceived by IVF with donor sperm after separation of mother and partner - partner not to be treated as father of child

In re R (A Child) (IVF Child: Paternity Rights) [2003] EWCA Civ 182: CA (Sir Andrew Morritt Vice-Chancellor, Lady Justice Hale and Lord Justice Dyson):

19 February 2003

The mother and X, who had become infertile following treatment for testicular cancer, signed a consent form for IVF treatment, acknowledging that they were being treated together and that X would become the legal father of any resulting child.

By the time of implantation of the embryo which led to the birth of the child, the parties had separated; X obtained an order for indirect contact.

He later applied for and was granted a declaration of paternity pursuant to section 28(3) of the Human Fertilisation and Embryology Act 1990.

The mother appealed.

Andrew McFarlane QC and Leona Harrison (instructed by Cobleys, Liverpool) for the mother; Pamela Scriven QC and James Gatenby (instructed by Stephen D Brine, Liverpool) for X; Peter Jackson QC (instructed by David Smith, CAFCASS legal services and special casework) for the guardian ad litem.

Held, allowing the appeal, that section 28(3) made it clear that the time at which legal paternity was created was the time when the embryo or the sperm and eggs which subsequently resulted in the birth of the child were placed in the woman; that the question whether the act of placing the embryo in the mother was done 'in the course of treatment services provided for her and a man together' should be answered at that time and no other; and that, therefore, X, who was neither the genetic father nor married to the mother, and whose relationship with the mother had ended by the time when the embryo had been placed within her, was not to be treated as the father of the child.

IMMIGRATION

Asylum application - fear of persecution and assassination by political gangs - finding as to sufficiency of protection if applicant returned to home country essential

Britton v Secretary of State for the Home Department: CA (Lords Justices Potter, Chadwick and Tuckey): 7 February 2003

The applicant, a Jamaican woman, claimed asylum in the UK under article 3 of the Geneva Convention and Protocol relating to the Status of Refugees and on human rights grounds, alleging that she had been threatened with death because she had witnessed a murder carried out by a violent gang.

Her claim was refused.

The special adjudicator accepted all her evidence about the threats to her and that the violence in her hometown had been beyond the control of police, but summarily dismissed her appeal on the convention ground, without considering the sufficiency of the protection available to the applicant in Jamaica, and did not consider any human rights grounds.

The Immigration Appeal Tribunal dismissed her appeal.

The applicant appealed.

Richard Drabble QC and Mark Henderson (instructed by Winstanley-Burgess) for the applicant; Jenni Richards (instructed by the Treasury Solicitor) for the secretary of state.

Held, allowing the appeal, that it was essential for the adjudicator to consider in detail the adequacy of the protection available to the applicant in her home country because a finding on that issue was a prerequisite to considering her application on the convention and human rights grounds; and that, accordingly, the application would be remitted to the adjudicator for reconsideration.

INSOLVENCY

Freezing order discharged on terms that company pay sum into joint bank account - company becoming insolvent and provisional liquidators appointed - creditor having no security rights over sums paid into account and not to be permitted to proceed with action against company

Flightline Ltd v Edwards and another [2003] EWCA Civ 63:

CA (Lords Justices Ward, Laws and Jonathan Parker): 5 February 2003

The applicant began proceedings against a company and obtained a freezing injunction.

It was agreed to discharge that injunction on payments exceeding 4 million being made on the company's behalf into a bank account in joint names of the parties' solicitors.

The company gave undertakings to the applicant in respect of the payments.

Thereafter, the company became insolvent and provisional liquidators were appointed.

Mr Justice Neuberger [2002] EWHC 1648 (Ch); (see [2002] Gazette, 10 October, 39); [2002] 1 WLR 2535 granted the applicant permission to continue its action against the company on the ground that it was a secured creditor as to the amount of the payments made into the joint account.

The liquidators appealed.

Martin Pascoe QC and Lucy Frazer (instructed by Lovells) for the liquidators; Gabriel Moss QC and Jeremy Goldring (instructed by Field Fisher Waterhouse) for the applicant.

Held, allowing the appeal, that for an equitable charge to be created over a specific fund, it was necessary to find not merely a restriction on disposal of the fund by the debtor but also an obligation on him to pay the debt out of the fund; that that principle applied directly to consent orders such as the one made in the instant case; that no provision existed to require the company to satisfy any judgment in the applicant's favour out of the money in the joint account; that the applicant was therefore not a secured creditor; and that, accordingly, permission to proceed with the action should not have been granted.

LOCAL GOVERNMENT

Development control - council deciding storage and distribution facility not infrastructure or urban development project, so no requirement to consider undertaking environmental assessment before granting planning permission - decision wrong in law and permission quashed

R (Goodman and another) v Lewisham London Borough Council and another: CA (Lords Justice Brooke and Buxton and

Mr Justice Morland):

14 February 2003

The council granted the interested party planning permission for the construction of a storage and distribution facility.

The claimants sought judicial review on the grounds that the decision was ultra vires because the council had not, before taking the decision to grant permission, undertaken an environmental assessment under the Town and Country Planning (Environmental Impact etc) Regulations 1999.

The judge refused the application.

The claimants appealed.

Richard Harwood (instructed by Richard Buxton, Cambridge) for the first claimant; James Maurici (instructed by the Solicitor to Lewisham London Borough Council) for the council; Keith Lindblom QC and Meyric Lewis (instructed by Park Nelson) for the interested party.

Held, allowing the appeal, that the first question to determine was whether the development fell within the description and limits set out in schedule 2 to the 1999 regulations; that, if the development were found to be a schedule 2 development, the council was bound to consider whether it was a development requiring an environmental impact assessment; that it was not a reasonable response when determining whether a development fell within schedule 2 to conclude or interpret that the construction of a storage and distribution facility could not be encompassed by the expressions 'infrastructure project' or 'urban development projects' under schedule 2, paragraph 10(b), and the council had reached an understanding of those expressions which was wrong in law; that in determining the meaning of the statutory expressions the concept of reasonable judgment had no part to play; and that, accordingly, the decision would be quashed.

Homeless person rejecting council's offer of accommodation - council officer's review concluding accommodation suitable - right of appeal to county court on point of law sufficient to satisfy homeless person's right to fair determination of civil rights

Runa Begum v Tower Hamlets London Borough Council (First Secretary of State intervening): HL (Lord Bingham of Cornhill, Lord Hoffmann, Lord Hope of Craighead, Lord Millett and Lord Walker of Gestingthorpe):

13 February 2003

The council offered the applicant, a homeless person, accommodation which she rejected.

At her request, made under section 202 of the Housing Act 1996, a council officer conducted a review and concluded that the premises were suitable.

On the applicant's appeal on a point of law under section 204, the judge in the county court concluded that failure to refer questions of disputed fact to an independent tribunal signified that the review procedure contravened the applicant's right to a fair determination of her civil rights under article 6(1) of the European Convention on Human Rights.

The Court of Appeal [2002] EWCA Civ 239; [2002] Gazette, 18 April; [2002] 1 WLR 2491 allowed the council's appeal.

The applicant appealed.

Paul Morgan QC and Steven Woolf (instructed by Maxim Solicitors) for the applicant; Ashley Underwood QC and Kelvin Rutledge (instructed by the Solicitor, Tower Hamlets London Borough Council) for the council; Philip Sales and Sarah Moore (instructed by the Treasury Solicitor) for the intervener.

Held, dismissing the appeal and assuming, without deciding, that the applicant's civil right was engaged, that since the reviewing officer was considering the council's own decision and the extent of its statutory duties, she was manifestly not an independent tribunal under article 6(1); but that article 6(1), as extended to administrative decisions which were determinative of civil rights, did not require the decision-making tribunal to possess the independence necessary to satisfy that article, so long as measures were in place to safeguard the fairness of the proceedings and the decision was subject to ultimate control by a court with jurisdiction to deal with the case as its nature required; that in the context of the housing scheme, administered by council officers who resolved factual issues only as preliminary to exercising their broader judgment, and where the review process was conducted under statutory regulations ensuring its fairness, the county court's jurisdiction, exercising that of the High Court in judicial review, was sufficient to satisfy article 6(1) (WLR).

PRACTICE

Court bundles - inclusion of irrelevant material and omission of relevant material - wrong to cite All England Law Reports where case reported in Law Reports or nominate report

Governor and Company of the Bank of Scotland v Henry Butcher & Co (a firm): CA (Lords Justices Aldous and Chadwick and Mr Justice Munby):

13 February 2003

The defendants, a firm and its partners, lodged ten bundles of documents with the Court of Appeal in support of their appeal in a case concerning a written guarantee given to a bank.

The bundles did not include copies of the partnership deed, the consultancy agreement or the guarantee.

The only documents contained in the defendants' bundles which were referred to in the course of the hearing were the notice of appeal and the judgment below.

No reference was made at all to the third or fourth bundles.

They also supplied a bundle containing 34 authorities and a second core bundle with a further copy of 12 of those same cases.

Brian Hurst (instructed by Davies & Partners, Gloucester) for the defendants; Antony Zacaroli (instructed by Walker Morris, Leeds) for the claimant.

Held, dismissing the appeal on the substantive issue, that the defendants' failure to comply with good practice and the specific requirements of, in particular, Practice Direction (Court of Appeal: Citation of Authority) [1995] 1 WLR 1096, Practice Direction (Citation of Authorities) [2001] 1 WLR 1002 and paragraphs 5.6(7), 5.8 and 15.11 of the Practice Direction supplementing part 52 of the Civil Procedure Rules, verged on the scandalous.

Two cases reported in the appeal cases had been provided in the form of All England Law Reports and one case in a nominate report reprinted in the English Reports had been supplied instead from the All England Law Reports Reprint; that the court had been hampered in its handling of the appeal by the unwieldy and disorganised state of the bundles lodged by the defendants; and that such a striking example of bad practice showed why the various practice directions were needed and why there had to be compliance with them.

REVENUE

VAT - value of supply - discount voucher on trade-in vehicle not increasing consideration paid for replacement vehicle

Hartwell plc v Customs and Excise Comrs: CA (Lords Justices Ward and Chadwick and Lady Justice Arden): 12 February 2003

The taxpayers, who were motor traders, accounted for VAT on their supplies.

On agreeing a sale/part exchange/ finance package with a customer, after the value of any trade-in vehicle had been agreed, the taxpayers issued that customer with a purchase plus voucher, which was worth more than the agreed trade-in value, for use as credit against the price of the supply by the taxpayers of his specified replacement vehicle.

Additionally, the taxpayers provided customers with free MOT vouchers.

The judge [2002] STC 22, reversing a VAT and duties tribunal, held that neither voucher increased VAT liability, which was to be assessed solely on the monetary consideration paid by the customer plus the agreed trade-in value.

The commissioners appealed.

Rupert Anderson (instructed by the Solicitor for Customs and Excise) for the commissioners; Roderick Cordara QC and Paul Key (instructed by KLegal) for the taxpayers.

Held, allowing the appeal in part, that, although the monetary equivalent attributable to a part exchange transaction which had been agreed between the parties was the value to be attributed towards the supply of the replacement vehicle, the purchase-plus vouchers provided for an over-allowance being given for the trade-in vehicle and, for the purposes of calculating the VAT chargeable, had no monetary value and thus did not operate to increase the consideration paid to the taxpayers for supplying the replacement; but that the MOT vouchers were not granted to a customer for a consideration to which section 19 of, and schedule 6 to, the Value Added Tax Act 1994 applied and thus the consideration on which VAT was payable was increased by the value of the vouchers.

ROAD TRAFFIC

Defendant charged with being in charge of motor vehicle after consuming so much alcohol that proportion in breath exceeded prescribed limit - statutory defence to prove no likelihood of driving - burden on prosecution to prove real likelihood of driving once defendant had discharged evidential burden

Sheldrake v Director of Public Prosecutions: QBD (Lord Justice Clarke, Mr Justice Henriques and Mr Justice Jack):

24 February 2003

The defendant was charged with being in charge of a motor vehicle after consuming so much alcohol that the proportion of alcohol in his breath exceeded the prescribed limit, contrary to section 5(1)(b) of the Road Traffic Act 1988.

The justices held that he had not proved the defence provided by section 5(2) of the 1988 Act that there was no likelihood of his driving while in excess of the prescribed alcohol limit and he was convicted.

The defendant appealed.

James Turner QC and Jamas Hodivala (instructed by Budd Martin Burrett, Colchester) for the defendant; Jonathan Ashley-Norman (instructed by the Crown Prosecution Service, Chelmsford) for the Director of Public Prosecutions.

Held, allowing the appeal (Mr Justice Henriques dissenting), that section 5(1)(b), read with section 5(2), made an inroad on or derogated from the presumption of innocence contained in article 6(2) of the European Convention on Human Rights; that, although a legitimate aim was being pursued by section 5(2) in that the likelihood or otherwise of the accused driving would normally have involved consideration of the accused's present or future intention to drive, the imposition of a legal burden on the defendant was not proportionate; that section 5(2) was therefore to be read down pursuant to section 3(1) of the Human Rights Act 1998, in order for it to be compatible with article 6(2) of the convention, so that it imposed only an evidential burden on the accused; and that, accordingly, once the issue had been raised by the defendant pointing to some evidence that there was no likelihood of his driving the vehicle while over the limit, the burden was on the prosecution to prove beyond reasonable doubt that there was real risk of the defendant doing so (WLR).

TORT

Duty of care - auditors failing to advise on provision for liabilities to policyholders guaranteed fixed level of income - not liable for losses sustained by directors failing to sell business sooner owing to contingent liabilities but potentially liable for losses caused by payment of overlarge bonuses in reliance on audited accounts

Equitable Life Assurance Society v Ernst & Young: QBD (Mr Justice Langley): 10 February 2003

From 1993 to 1999 the claimant, which carried on life assurance, annuity and pensions business, paid differential terminal bonus payments to policyholders, the effect of which was to reduce those payments on policies with guaranteed annuity rates to bring them into line with bonuses payable to other policyholders.

In 2000, the House of Lords held that practice to be unlawful, thereby exposing it to additional liabilities to policyholders of about 1.5 billion: Equitable Life Assurance Society v Hyman (see [2000] Gazette, 3 August, 38); [2002] 1 AC 408.

The claimant brought an action against its auditors, claiming damages for negligence on the basis that if they had properly advised the claimant on the need to make adequate provision for that liability the claimant would have sold its business sooner and obtained a higher price for it and/or would have retained more of its assets by making lower bonus payments to policyholders in 1997 to 1999.

The auditors applied to strike those claims out as having no reasonable prospect of success and/or for summary judgment to be entered in their favour, on the basis that the alleged losses fell outside the scope of the duty of care owed by auditors to their client and/or had not been caused by them.

Iain Milligan QC, Robert Miles QC and Guy Morpuss (instructed by Herbert Smith) for the claimant; Mark Hapgood QC, Cyril Kinsky and Mark Simpson (instructed by Barlow Lyde & Gilbert) for the auditors.

Held, granting the application, that the consequences for which an adviser was responsible were those which the law regarded as best giving effect to the express obligations assumed by the adviser; that it would be odd if auditors were liable to their client for losses caused by the client not putting itself up for sale when they were not liable to a purchaser for losses sustained as a result of buying the client company; that, as a matter of law, auditors were not generally liable for losses arising out of the client company's continued existence; that to establish causation a claimant had to attribute to the losses claimed a cause which could then be assessed by the application of the scope of duty and common sense, and it was not sufficient that a breach of duty had merely given rise to the opportunity for the loss to be sustained; that, on proof of causation, auditors could be liable for losses sustained as a result of paying out overgenerous bonuses; that the losses claimed in respect of bonus declarations as currently pleaded were unsustainable; but that, since a viable claim might exist under that head, the claimant would be given a short period in which to consider amending its claim in that regard.

TRADE

Parallel imports - pharmaceutical products repackaged or relabelled on being imported into UK from other member states - irrebutable presumption that repackaging prejudicial to specific subject matter of trade mark proprietor's rights not applying to relabelling of goods

Glaxo Group Ltd and others v Dowelhurst Ltd [2003] EWHC 110 (Ch): ChD (Mr Justice Laddie):

6 February 2003

The claimants were pharmaceutical companies that owned the registered trade marks of several products, which they originally sold in simple boxes.

The defendants parallel-imported the products into the UK from other member states of the European Union, either using replacement boxes or over-sticking the original boxes with new labels.

On the claimants' action for trade mark infringement, the High Court referred to the European Court of Justice the question whether the proprietor of a trade mark which was used on parallel-imported goods could object to the repackaging of those goods when the latter activity harmed neither the origin nor the quality functions of the marks.

The Court of Justice held in Boehringer Ingelheim KG v Swingward Ltd (Case C-143/00) [2003] Ch 27 that a proprietor could rely on its trade mark rights to prevent a parallel importer from repackaging pharmaceutical products unless the exercise of those rights contributed to artificial partitioning of the Community markets.

The action was restored for hearing before the High Court.

Michael Silverleaf QC and Richard Hacon (instructed by Jones Day Gouldens) for the claimants Glaxo Group and Boehringer Ingelheim KG; Simon Thorley QC and Richard Arnold QC (instructed by Willoughby & Partners and CMS Cameron McKenna) for the claimants SmithKline Beecham and Eli Lilly & Co; Nicholas Green QC and Henry Carr QC (instructed by Roiter Zucker) for the defendants.

Held, that, although a trade mark proprietor could only interfere with parallel importation of his own goods where it was necessary to do so to protect the specific subject matter of those rights, there was an irrebutable presumption that repackaging the goods was prejudicial to that subject matter; that therefore, even if it the repackaging did not adversely affect the quality of the goods or the mark's function, prejudice to the specific subject matter had to be presumed; but that the presumption did not apply to relabelling of the goods; and that, accordingly, an injunction would be granted restraining the defendants from infringing the claimants' trade marks by marketing the repackaged products, but the injunction would not extend to the relabelled goods.

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.uk

WLR means that a report has been submitted for publication in the Weekly Law Reports