Category Archives: Business law

The Brexit court case (Miller/Santos): Day one digested

Here are some of what seem to this writer crucial exchanges during the Brexit High Court case R (Miller and Santos) v Secretary of State. mainly to do with Lord Pannick’s first day arguments for the claimants. The links to the transcripts appear at the bottom along with quoted cases and comment. A report/analysis of the Supreme Court case is here: What if Eadie was right?

Firstly, two extracts from the first day of this case (Oct 13)

Exchange between Lord Justice Sales and Lord Pannick QC (for Miller) at page 54/55 of the draft transcript:

SALES LJ: Am I right in thinking that you  say that the effect of the argument for the government  would be that there wouldn’t need to be a repeal of the  1972 Act or section 2 of it, it is just that the content  of the obligation in section 2, EU rights, would fall  away, because they would cease to be EU rights?
16   LORD PANNICK: Precisely. Your Lordship is very aware and  I am not going to enter into any political debate, but  your Lordship knows that the government have announced  that there is going to be a great repeal bill which is  to be produced some time in the next session. I say  that the consequence of the defendant giving  notification will be that at a point in the future, it  is inevitably the case that the United Kingdom leaves  the EU and the consequence of that, as a matter of law,  is that all of the rights enjoyed under section 2(1) and

page 55
section 3(1), which is the process rights relating to the Court of Justice, fall away. There is simply nothing left. And therefore a great repeal bill, politically or otherwise, may be desirable. I say  nothing about that. It will not affect those questions.  Those rights will fall away as a consequence of the  United Kingdom leaving the EU. Because when we leave,  there are no treaty obligations. That is the whole  point of leaving. And indeed that is the government’s  intention. This is not a happenstance, this is the  whole point of notification. Notification is intended  to remove the current substance of section 2(1) and  3(1). Continue reading

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Arnold v Britton: Lord Neuberger abolishes common sense

Lord Neuberger, President of the UK Supreme Court, has issued one of his presidential proclamations – which is what he does when he wishes to change the law from his lofty but unaccountable position. Nominally the case he was considering, Arnold v Britton & Others, was a simple enough matter regarding service charges for a set of chalets on the Gower peninsula: clause 3(2) of the lease said the price for work such as mowing grass, maintaining roads through the site and sewers &c was to be £90 in 1974 rising by 10% a year; how should this be interpreted nearly 40 years on when the annual figure was more than £3,000 per chalet and rising? (Inflation would produced a figure of less than £800 by 2012.)

If the charge were truly to rise by 10% a year the lessor would be making a very substantial surplus over the term of the lease thanks to compounding (Year 2: £90 + £9 = £99; year 3: £99 + £9.90 = £108.90 and so on annually.) As Davis LJ in the Court of Appeal noted:

 “The figures before us are illustrative of the consequences. For a lease on a one year compounded uplift, the annual service charge payable was, for the year end 2012, some £3,060. At the same compounded annual rate of increase, the projected annual sum payable for service charges in the last year of the term stands to be some £1,025,004: this for modest holiday chalets, the use of which is restricted to half of each year.”

That’s a million pounds per chalet. There were 25 involved in the litigation but 91 in total, some with a less onerous system of payment for services. The outcomes would vary depending on when the leases were issued. Nevertheless, if the clause in the lease were allowed to stand, the lessors would have pulled in hundreds of millions in pure profit over the 99 years of the lease. This on a term of the lease which, it is axiomatic, should not be profit-making since it is merely for the lessor to recover expenditure on ongoing maintenance of the common facilities (see Lease – though holiday chalet leases aren’t covered by legislation for homes).  Continue reading

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Gifted deposit indemnity insurance: a costly and unnecessary burden on homebuyers

House conveyancers are adding one more bit of indemnity insurance to some house purchasers’ bills  – and it looks as if “gifted deposit indemnity insurance” is of no use except to the insurers who sell it.

Add it to the list of various types of indemnity insurance for chancel repairs; for failure of a previous owner to gain planning permission; for a previous owner breaching restrictive covenants; indemnity for various other legal costs.  Some of these products are of dubious value – but a new study suggests gifted deposit indemnity insurance – used (at the homebuyer’s expense) to protect banks if someone giving a gift towards a home purchase goes bankrupt – has no real function at all.

The issue is increasingly significant as more and more parents are giving financial help for their children’s home purchases.  The insurance is paid for by the home buyer, intended to protect the mortgage provider, but in reality would only kick in if the conveyancers weren’t doing their job properly or the bank itself was acting in bad faith. Arguably that means it actually has no real purpose at all.

The principle behind the insurance is that it protects the mortgagee’s (ie bank lending the money) title in the property if the donor of a gift or informal family loan goes bankrupt and creditors make a claim to the money as part of the donor’s assets. Buyers are said to feel pressured into buying the insurance, costing up to £300, even though they don’t understand it.  

But is it strictly necessary? There is strong evidence that conveyancers are the ones who don’t understand the law and that the insurance is for the most part unnecessary – even when “bank of mum and dad” does go belly-up.

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PLT Anti-Marketing cold-call blocking: not a ‘scam’ after all?

An attempt to close down a company accused by the UK Government of a cold-call blocking “scam” has hit something of a stalemate in the Court of Appeal. PLT Anti-Marketing Ltd charges £40 a year for a cold-calling and junk mail blocking service already available free from official providers. The court has quashed a judge’s finding that PLT breached regulations and Lord Justice Briggs has produced strong arguments in favour of the company despite an attempt by the Department of Business (BIS) to close it down.

Nevertheless PLT remains barred from pursuing its business as it wishes until a full trial – when judgment could turn against it. The litigation has so far been going on for more than a year and a half – during which time PLT has been able to continue charging current customers but not to take on new ones without telling them about the free service. The whole affair raises the issue of whether current legislation is adequate for dealing with alleged consumer scams of this sort.

The free cold-calling and direct mail blocking services are available from Telephone Preference Service (TPS – provided by Ofcom; see: Regulation 26 of the Electronic Communications (EC Directive) Regulations 2003) and the Mail Preference Service (MPS – offered by the Direct Marketing Association in co-operation with the Post Office). PLT takes the names of its paying customers and adds them to the free lists. It maintains a service for its customers to complain about any continued unwanted calls and mail, but that also links into the free official services. Customers continue to pay on a monthly or annual basis. 

The Department of Business (BIS) started investigating PLT in 2012. In April 2013 it issued a “public interest winding up petition” under Companies Act 1985 S.124A – and the matter has been bogged down in court hearings ever since.

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USA v Nolan: When must redundancy consultation start?

The European Court of Justice has balked at a decision that is urgently needed to clarify the requirements imposed on employers to consult workers’ representatives before making staff redundant.

In the case of United States of America v Nolan (Case C-583/10 ECJ), the court decided it had no jurisdiction to rule on the matter. Christine Nolan worked for the US Army in Britain and the relevant EU Directive “does not apply to workers employed by public administrative bodies or … by equivalent bodies” – including the US Army.

Nevertheless her case (which has returned to the Court of Appeal – see note below) epitomises the issue. Redundancies are governed by the EU Directive 98/59. Article 2 of that directive provides:

1. Where an employer is contemplating collective redundancies, he shall begin consultations with the workers’ representatives in good time with a view to reaching an agreement.

2. These consultations shall, at least, cover ways and means of avoiding collective redundancies or reducing the number of workers affected, and of mitigating the consequences by recourse to accompanying social measures aimed, inter alia, at aid for redeploying or retraining workers made redundant. [Emphasis added]

Furthermore to enable workers’ representatives to make constructive proposals, an employer is bound, in good time during the course of the consultations, to supply them with all relevant information and to notify them in writing of the matters specified in subparagraph 2.

But what does “contemplating” mean and hence what is “in good time”? Section188 of the Trade Union and Labour Relations (Consolidation) Act 1992, which is intended to transpose the Directive into British law, requires consultation when the employer is “proposing” redundancies. What does “proposing” mean? Is it different from “contemplating”?

The Act sets a minimum of 90 days consultation when 100 or more workers are to be made redundant or 30 days for less than 100 – but how far down the line of decision-making can management already be before it activates the statutory consultation period? “Contemplating” seems to be something you would do rather earlier in the process than “proposing”, so unions have argued that consultation must come at that earlier stage.

USA v Nolan

In USA v Nolan Christine Nolan worked at a US army base in Britain with about 200 civilian staff. By March 2006, the US had decided to close the base at the end of September 2006 (six months or so ahead). On 21 April 2006 plans for closure became public and in June staff representatives were told all employees were at risk of redundancy. The US Army considered consultation on the redundancies started on 5 June (more than 90 days before closure was planned).

On 30 June, the Army gave the employees notices of dismissal, to take effect at the end of September. Nolan, a worker representative, brought a claim on behalf of those employees on the basis that the US had failed to comply with its collective consultation obligations by not consulting before 5 June.

The USA argued that: “no employer has an obligation to consult with its employees about a proposed operational decision to close a workplace that will lead to redundancies: it is said that the consultation obligation only arises after the employer has made such decision and is then proposing to dismiss the employees as redundant”.

Nolan, however, succeeded in a claim for a protective award (a penalty paid to each worker affected if there is not proper consultation) at an Employment Tribunal and at the Employment Appeal Tribunal. The Court of Appeal, however, sought guidance from the ECJ on when consultation should start.

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