Law reports

Law reports

CONTRACT

Injunction granted for future following breach of restrictive covenant - claimant seeking damages for benefit gained by defendant from infringement - court not precluded from awarding compensation for past infringement without proof of financial loss

Experience Hendrix LLC v PPX Enterprises Inc and another: CA (Lords Justice Peter Gibson and Mance and Mr Justice Hooper): 20 March 2003

The defendants were entitled, under a settlement with the claimant's predecessor in title to the master recordings of musical titles listed in schedule A featuring Jimi Hendrix, a deceased guitarist.

The defendants breached the settlement by granting licences in respect of master recordings some of which were not within schedule A but came within a clause permitting the defendants to honour existing licences and contracts of non-schedule A masters but not to extend or renew such contracts or licences without consent or to issue further or other recordings except those specifically covered by such contracts or licences.

The judge granted the claimant injunctions expressly prohibiting the defendants from issuing or releasing, or causing or permitting the issue or release of, recordings originally made by or on behalf of the defendants on which Jimi Hendrix performed in any capacity whatsoever, other than those set out in schedule A, but dismissed its claim for damages and an account of profits.

The claimant appealed.

Michael Briggs QC, Philip Jones and Jennifer Haywood (instructed by Eversheds) for the claimant; Robert Englehart QC, Andrew Green and Victoria Windle (instructed by Harbottle & Lewis) for the defendants.

Held, allowing the appeal, that a court, which had granted a beneficiary of a restrictive covenant an injunction to restrain future breaches after the defendant, by an infringement, had gained some benefit, was not in principle precluded from ordering payment of a reasonable sum in damages in compensation for the past infringement, even though the claimant could show no financial loss to himself; that the damages could be measured by the benefits gained by the wrongdoer from the breach; and that, accordingly, the defendants would be required to make a reasonable payment in respect of the benefit gained.

ELECTIONS

Claimants selected as candidates by political party - party deselecting claimants following allegations of irregularities - interim injunction not to be granted compelling party to allow candidates to stand

Choudhry and others v Treisman: ChD (Mr Justice Stanley Burnton): 31 March 2003

The claimants had been selected by the process prescribed by the rules of a political party to stand as that party's candidates in the local government elections due to take place on 3 May 2003.

A committee of the party investigated a number of allegations relating to membership irregularities and the selection process of the claimants and decided that it was unsound, although there was no suggestion of wrongdoing on the part of the claimants.

The party decided to deselect the claimants and impose other candidates in their places.

The claimants sought urgent interim injunctions requiring the party, represented by its general secretary, to nominate them for the elections and preventing it from submitting nominations for others in their places.

The applications were urgent since nominations closed on the day after judgment was given.

Philip Coppel (instructed by Freethcartwright, Leicester) for the claimants; John Cavanagh QC and Nigel Giffin (instructed by Thompsons) for the general secretary.

Held, refusing the applications, that, save in exceptional circumstances, the court should not compel a political party to allow a candidate to stand for election in its name if the party had genuine and substantial concerns as to the regularity and honesty of their selection process; that since it was unlikely that there would be a trial, the normal approach to interlocutory injunctions was not applicable; that when considering mandatory relief, the court had to have a high degree of assurance that the claimant would be able to establish his right at a trial; that the rules of natural justice required that any investigation into the selection process and membership irregularities of a party's candidates be conducted fairly and honestly; that since it had not been established that each claimant had received sufficient notice of the allegations, there was a serious issue to be tried; but that, since there were serious concerns on the part of the party as to the regularity and honesty of the claimants' selection, the arguable triable issue was not enough to justify the grant of a mandatory injunction; and that, moreover, the test for the grant of mandatory relief had not been satisfied since the risk of injustice if the injunction were granted outweighed the risk if it were not.

EMPLOYMENT

Discrimination - sex - equal pay - discretionary bonus schemes and salary arrangements - transparency of pay structures - fresh guidelines to be observed when assessing whether discrimination

Barton v Investec Henderson Crosthwaite Securities Ltd: EAT (Judge Ansell, Ms D Palmer and Mr GH Wright): 3 April 2003

The applicant in the employment tribunal was an experienced female analyst who worked in the City of London.

She discovered what appeared to be substantial discrepancies in salary and discretionary bonus payments between herself and at least one other male employee of the same institution, and she subsequently brought complaints in the employment tribunal under the Sex Discrimination Act 1975 and the Equal Pay Act 1970.

The claims were dismissed, the tribunal finding, among other things, that the employer had made out the 'material factor' defence under section 1(3) of the 1970 Act.

The applicant appealed.

Robin Allen QC and David Reade (instructed by Bird & Bird) for the applicant; Roy Lemon (instructed by Hammond Suddards) for the employer.

Held, allowing the appeal, that the provisions of section 63A of the 1975 Act, which came into force on 12 October 2001, necessitated the giving of new guidelines, going beyond those in King v Great Britain-China Centre [1992] ICR 516, approved in Glasgow City Council v Zafar [1998] ICR 120, particularly in light of the words 'the tribunal could...conclude in the absence of an adequate explanation' in section 63A; that a result was that in such sex discrimination cases a two-stage process of analysis was applicable, involving the establishing of a prima facie case and thereafter the shifting of the burden of proof as to discrimination onto the employer; that, furthermore, in the case of the claim brought under the 1970 Act, there was a requirement of objective justification for an employer to establish the material factor defence, and the approach and matters to be proved were clarified in Brunnhofer v Bank der sterreichischen Postparkasse AG [2001] ECR 4961 and Bilka-Kaufhaus GmbH v Webers von Hartz [1987] ICR 110; and that, accordingly, since neither claim had been approached appropriately, both would be remitted to the tribunal.

Transfer of undertaking - division into parts of entity being transferred - not a prerequisite that part transferred should have been separate economic entity before transfer

Fairhurst Ward Abbotts Ltd v Botes Building Ltd and Others: EAT (Judge Burke QC, Mr D Norman and Mr J C Shrigley): 27 March 2003

An employment tribunal found a number of employees in a transferred undertaking to have been unfairly dismissed by the transferee.

The conclusion was founded on the finding that a valid transfer had occurred for the purposes of the Transfer of Undertakings (Protection of Employment) Regulations 1981.

On appeal, the appellant transferee raised the issue whether, when an undertaking or economic entity operated by A ceased to be operated by A and continued in the hands of others but was divided into more than one part, and one or more of the divided parts was taken over by B, there could be a transfer of undertakings falling within regulation 3 of the 1981 regulations.

Jonathan Swift (instructed by Clarkson Wright & Jakes, Orpington) for the appellant; Damian Brown (instructed by DLA) for the first respondent; Andrew Gumbiti-Zimuto (instructed by OH Parsons & Partners) for the other respondents.

Held, dismissing the appeal, that where an undertaking was to be transferred, the protection afforded to employees within the undertaking by the 1981 regulations, safeguarding the rights of employees in the event of transfers of undertakings, businesses or parts of undertakings and businesses, would be greatly reduced if, as a result of a division of the undertaking into two or more parts, each of which carried on in relation to that part the identical undertaking previously carried on by one employer in the whole, there was no relevant transfer of either or any of the parts; that it would be neither logical nor practical to find that there was a requirement for the part transferred of itself to have been a separate economic entity before transfer; and regard was also to be given to the fact that the respondents' contentions preserved to an important extent the purposes and intentions of Council Directive 77/187/EEC (since re-enacted as Council Directive 2001/23/EC) and the 1981 regulations; and that, accordingly it was not a prerequisite of a conclusion that there had been a transfer within regulation 3 of the 1981 regulations of a part of an undertaking, that such part was a separate economic entity in the hands of the transferor before the transfer, so that it had been open to the employment tribunal to resolve the issue as to economic entity in favour of the employees.

INTERNATIONAL

Foreign judgment - US appellate court upholding confiscation order after applying fugitive disentitlement doctrine - registration in English court not contrary to interests of justice

Government of the United States of America v Montgomery (No 2): CA (Lord Woolf Chief Justice, Lords Justice Kennedy and Scott Baker): 24 March 2003

The US District Court made a confiscation order against the defendant, who had moved from the US to live in England.

The US Court of Appeal, applying the fugitive disentitlement doctrine under which it did not have to hear or decide the appeal of a fugitive, dismissed the defendants' appeal, although in its judgment it dealt with many of the defendant's arguments.

The US government applied to register the confiscation order in the English courts, pursuant to section 97 of the Criminal Justice Act 1988.

The judge granted the application, holding that registration was not contrary to the interests of justice, despite the fact that because of the application of the fugitive disentitlement doctrine the order would have breached article 6 of the European Convention on Human Rights if the US had been a party to that convention.

The defendant appealed.

James Lewis QC and Clair Dobbin (instructed by Tarlo Lyons) for the defendant; Andrew Mitchell QC and Kennedy Talbot (instructed by Crown Prosecution Service, headquarters) for the US government.

Held, dismissing the appeal, that whether it was in the interests of justice to register a confiscation order made in a foreign jurisdiction should, in most cases, be answered by examining the facts of what had occurred in that jurisdiction, without the need to refer in detail to the convention jurisprudence; that English law was sufficiently flexible to make an appropriate allowance for the different approaches to achieving justice adopted in different jurisdictions; that the reason for the doctrine being applied in the defendant's case was not to vindicate the dignity of the US court but because the court thought that it was the only available sanction which could achieve obedience to the court's order; that had there been alternatives available which meant that it had not been necessary to apply the fugitive disentitlement doctrine it might have been unjust to register an order; but that, in the circumstances of the present case, particularly given the fact that the US Courts of Appeal had determined the majority of the arguments relied on by the defendant, the application of the doctrine did not mean that it was contrary to the interests of justice to register the order.

(WLR)

PRACTICE

Application to strike out for abuse of process - application for summary judgment - applications not to be allowed to develop into mini-trials

Barrett v Universal-Island Records Ltd and another: ChD (Mr Justice Laddie): 28 March 2003

The claimant, acting on his own behalf and as administrator of his late brother's estate, claimed compensation from the defendant record companies arising out of the alleged exploitation of recordings made by a band of which the claimant and his brother had been members.

The defendants applied, among other things, to have the claim form struck out under the Civil Procedure Rules 1998 (CPR), rule 3.4(2) or under the court's inherent jurisdiction as an abuse of process; and for summary judgment under CPR part 24 on their counterclaim for an injunction to restrain the claimant from continuing the proceedings.

Richard Arnold QC (instructed by Charles Russell, Guildford) for the claimant; Elizabeth Jones QC and Daniel Lightman (instructed by Eversheds) for the defendants.

Held, dismissing the applications, that neither CPR rule 24.2 nor rule 3.4(2) drew a distinction between applications for summary relief on the ground of abuse of process and other summary applications; that in both cases the court was being invited to deprive a party of its normal entitlement to a full trial of its claim or defence and in order to do so at an early stage, the court had to have a high assurance that the claim or defence would not succeed at the trial; that there was no reason in principle why applications based on allegations of abuse of process should be treated in any different way from other summary applications for final relief, so that the rule that such applications should not be allowed to develop into mini-trials applied as much to one type as the other; and that, since the facts and issues were complicated, the instant case was not suitable for summary determination and it was not safe to strike the claim out.

Cross-undertaking not to bring proceedings in any other jurisdiction incorporated in freezing order - purpose of undertaking to prevent freezing order from causing injustice or oppression to defendant - permission to bring specific proceedings granted

Bates v Microstar Ltd and another: ChD (Mr Bernard Livesey QC, sitting as a deputy High Court judge): 28 March 2003

The claimant, as a consequence of a judgment, was the registered owner of 2.5% of the shares of the first defendant company, to be paid by the second defendant, the de facto director of the company which was domiciled in Jersey.

The judge had also ordered that accounts and inquiries be taken regarding part of the remedy due from the company alone, proceedings which were presently at the directions stage.

Although the company had acquired 10 million before the action was commenced, that money had been dissipated on the instruction of the second defendant, so that the shareholding was worthless.

A post-judgment freezing order was made against the defendants, and the claimant undertook not, without permission of the court, to begin proceedings against either defendant in any other jurisdiction.

The claimant applied for permission to issue and serve on the second defendant proceedings in Jersey for breach of fiduciary duty owed to the company, intending to bring a derivative action against the directors, including the second defendant.

Malcolm Chapple (instructed by DLA) for the claimant; Nicholas Leviseur (instructed by Tibber Beauchamp-Ward) for the defendants.

Held, granting permission, that the purpose of a cross-undertaking imposed on an applicant for a freezing order was to prevent the order from causing injustice or being used as a weapon of oppression against the defendant; that where an applicant undertook not to bring proceedings in another jurisdiction without the permission of the court, 'oppression' included the institution of multiple proceedings in different jurisdictions; that the inherent jurisdiction of the court to grant freezing orders coupled with orders for discovery was to be exercised only where it was necessary in order to prevent the court's order from being rendered worthless by the actions of a defendant to conceal, remove or dissipate his assets with a view to avoid giving satisfaction; that any consideration of the basis of whether an applicant should be released from his cross-undertaking had to include considerations set out in CPR rule 1.1(2), under which cases should be dealt with justly; and that, in the instant case, the derivative action was not abusive.

REVENUE

Inheritance tax - ten year charge on discretionary settlements - execution of five similar trust deeds not creating single settlement for inheritance tax purposes

Rysaffe Trustee Co (CI) Ltd v Inland Revenue Commissioners: CA (Lords Justice Schiemann, Mummery and Dyson): 20 March 2003

In 1984, two brothers, both domiciled in the UK, each executed five deeds settling property on five similar discretionary trusts.

The trustee was an overseas trust company.

In April 2000, the Inland Revenue issued notices under section 64 of the Inheritance Tax Act 1984 relating to the ten-year charge on discretionary settlements on the basis that the shares in the five identical funds settled by each brother were to be taken as property comprised in a single settlement.

Mr Justice Park [2002] EWHC 1114 (Ch); [2002] STC 872, reversing a determination of a special commissioner, rejected the Inland Revenue's case which sought to rely on the 'associated operations' provisions in section 268 of the 1984 Act, and allowed the trustee's appeal holding that the five deeds were to be treated as creating five separate settlements.

The Inland Revenue appealed.

Hugh McKay (instructed by the Solicitor of Inland Revenue) for the Inland Revenue; David Ewart (instructed by Howes Percival) for the trustee.

Held, dismissing the appeal, that under the general law each brother had made five separate settlements; that the definition provisions in section 43 of the Inheritance Tax Act 1984 did not operate to reduce them to one settlement; and that thus there were five charges to inheritance tax, it being neither appropriate nor necessary to consider whether the five settlements were created by 'associated operations' within the meaning of section 268 of the Act.

Income tax - employment - application of IR35 anti-avoidance provisions to software consultant operating on own account through service company

Synaptek Ltd v Young (Inspector of Taxes): ChD (Mr Justice Hart): 28 March 2003

G, a consultant software engineer in business on his own account, provided services to clients through the taxpayer, a company he had acquired in 1990.

He and his wife were the company's only directors and shareholders.

In 1999, the company contracted with a government department for the provision of G's services for a six-month period.

By a notice dated 30 April 2001, the Inland Revenue claimed that the company was to be treated as liable to pay primary and secondary class I contributions in respect of G's earnings from the engagement.

In so doing it relied on section 60 of, and schedule 12 to, the Finance Act 2000 and regulation 6 of the Social Security Contributions (Intermediaries) Regulations 2000 (SI 2000/727).

General tax commissioners dismissed the company's appeal against the notice.

The company appealed.

Conrad McDonnell (instructed by Bond Pearce) for the company; Clive Sheldon (instructed by the Solicitor of Inland Revenue) for the Inland Revenue.

Held, dismissing the appeal, that the company was an intermediary and G performed personal services for the client for the purposes of regulation 6 of the 2000 regulations; that it was a question of fact and not of law for the commissioners to decide whether the contractual arrangements were such that had there been a contract between G and his client it would have been a contract of service, and not one for services; and that taking all the circumstances into account the commissioners, not having erred in law, were fully entitled to conclude that the IR35 provisions applied so as to make the company liable for G's insurance contributions.

TRUSTS

Duties of trustee - disclosure of trust documents - court's jurisdiction not dependent on proprietary nature of claimant's right

Schmidt v Rosewood Trust Ltd: PC (Lord Nicholls of Birkenhead, Lord Hope of Craighead, Lord Hutton, Lord Hobhouse of Woodborough and Lord Walker of Gestingthorpe): 27 March 2003

The petitioner sought disclosure of documents relating to two settlements of which his late father had been a co-settlor and under which he claimed discretionary interests both in his own capacity and as the administrator of his father's estate.

The respondent trustees opposed disclosure on the ground that the petitioner was not a beneficiary under the settlements and his father was never more than an object of a power and as such had no entitlement to trust documents or information.

An order for disclosure was made by the High Court of the Isle of Man but set aside on appeal to the Staff of Government Division.

The petitioner appealed to the Privy Council.

Alan Steinfeld QC and Marcus Staff (instructed by Lane & Partners) for the petitioner; David Brownbill and Michael Gibbon (instructed by Saunders & Co) for the trustees.

Held, allowing the appeal and remitting the matter for further consideration by the High Court, that although a beneficiary's right to seek disclosure of trust documents was sometimes not inappropriately described as a proprietary right, it was best approached as one aspect of the court's inherent and fundamental jurisdiction to supervise and, if appropriate, intervene in the administration of a trust, including a discretionary trust; and that that jurisdiction did not depend on any distinction between transmissible and non-transmissible (that is to say, discretionary) interests, or between the rights of an object of a discretionary trust and those of an object of a mere power (of a fiduciary character).

(WLR)