Companies have Human Rights too!

The High Court has upheld the right of corporations to bring claims under the Human Rights Act.

 

Breyer Group Plc and others v Department of Energy and Climate Change [2014] EWHC 2257

Compensation of £140 million is claimed by the companies against the Department of Energy and Climate Change (DECC) under the review of its solar PV (photovoltaic) feed-in tariff (FITs) scheme.

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The Court of Appeal and Supreme Court had previously decided in Judicial Review proceedings that DECC’s actions were unlawful. The DECC had failed to follow the FITs statutory review procedure for changing tariffs by issuing a consultation on short notice and retrospectively.

     Background

Friends of the Earth and two solar PV companies brought a successful judicial review (JR) challenge to the consultation. The Administrative Court decided that DECC’s proposal to cut FITs on 12 December 2011, 11 days before its consultation on that proposal closed (on 23 December 2011) was unlawful because it breached the statutory scheme for modifying FITs

In the meantime, many proposed smaller solar PV schemes under way were dropped or failed due to the uncertainty created by DECC’s October 2011 consultation announcement and the JR proceedings.

Civil claim for damages

In January 2013, 17 solar PV FITs installation, supplier and developer companies commenced civil proceedings against DECC claiming £140 million of losses resulting from DECC’s FITs 2011-12 solar PV tariff review. The claimants argued that they had been hit by cancelled orders and had to abandon solar PV projects due to DECC’s October 2011 consultation proposals announcement and its breach of the tariff modification procedure under the FITs statutory scheme.

Human Rights Claims

Article 1 of the first Protocol (A1P1) to the European Convention on Human Rights (ECHR) is a qualified right that provides that every natural or legal person is entitled to the peaceful enjoyment of their possessions. Therefore, the right extends to companies, because a company is treated at law as having a legal personality.

Because DECC had unlawfully interfered with the claimants’ possessions in breach of A1P1, the claimants are entitled to damages arising from concluded contracts

Contracts and losses protected by A1P1

  • Signed and concluded contracts were assets, and therefore “possessions” under A1P1. They were tangible, assignable and had a present economic value.
  • Unsigned contracts could not be possessions protected by A1P1. There is no authority for the proposition that an unsigned or incomplete contract is an asset. An unsigned or incomplete contract is no contract at all, intangible, non-assignable and absent present economic value.
  • Loss of future income is not a possession protected by A1P1, unless it has already been earned, or is definitively payable.
  • Goodwill may be an asset, and therefore a possession under A1P1, because it has been built up in the past and has a present-day value, as distinct from only being referable to events that may, or may not, happen in the future.
  • Loss of marketable goodwill caused by interference that at the time of the interference can be capitalised is, in principle, protected by A1P1. On the other hand, interference causing only a potential loss of goodwill for the future is a claim for loss of future profit and so not recoverable.

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Decision

Contracts that the claimants had entered into by 31 October 2011 and that were frustrated because of DECC’s October 2011 consultation proposal were an element of the marketable goodwill in the claimants’ businesses. Therefore, these contracts represented a possession protected by A1P1. The claimants could, in principle, recover for the loss of that element of the marketable goodwill in their businesses.

Even if the loss of unsigned or unconcluded contracts damaged the claimants’ goodwill, such losses are losses of future income and therefore not recoverable under A1P1.

As a matter of law and common sense, DECC’s publication of its October 2011 consultation proposal amounted to an interference with “possessions” under A1P1. DECC acted carefully, deliberately and unlawfully. It could not be characterised, as DECC argued, as “merely a proposal”.

Comment

This High Court decision on the preliminary issue is important:

DECC is potentially liable for claims of approximately £140 million due to its failure to comply with the FITs statutory scheme.

It provides a useful analysis of the extent to which commercial contracts and goodwill can be protected by bringing a claim under A1P1.

To establish an A1P1 claim for interference with possessions, it was necessary to show material economic consequences, due to state action.

The UK Government was liable for a Consultation Document, rather than a final decision.

The DECC indicated an intention to appeal.

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Brand owners win test case blocking injunction against ISP’s

In a landmark judgement on 17 October the High Court made orders blocking websites structured to infringe trade mark rights by selling counterfeit goods online.

Cartier International AG & Anr v. British Sky Broadcasting Limited & Ors, High Court of Justice, Chancery Division, HC [2014] C01382.

In a 266-page decision Mr Justice Arnold decided that five major internet service providers – the ISPs, (British Sky Broadcasting Group Plc, BT Group Plc, EE, TalkTalk and Virgin Media) should

“block or at least impede access”

by subscribers to six “Target Websites”. The websites were selling cheap replicas or counterfeit goods including jewellery and watches.

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The court held that there is a clear public interest in preventing the sale of counterfeit goods online and the Claimant had a

‘legitimate interest in curtailing such acivity [which] would not interfere with the provision by the ISPs of their services to their customers’.

Blocking injunctions are not new in cases of online copyright infringement. Orders have been made against ISPs by the English Courts in various cases in favour of film studios, record companies and the Premier League and regarding website indexing. However, until now, they have been made pursuant to s.97A of the Copyright, Designs and Patents Act 1988 (“CDPA 1988”) providing the High Court the power to grant injunctions against service providers, (taken as including ISPs) where that service provider has actual knowledge of another person using their service to infringe copyright.

There is no provision equivalent to s.97A CDPA 1988 in the Trade Marks Act. Richemont, the luxury brands company behind Cartier and Montblanc here relied instead on Article 11 of the Enforcement Directive (2004/48/EC which provides

“Member States shall also ensure that rightholders are in a position to apply for an injunction against intermediaries whose services are used by a third party to infringe an intellectual property right …”

The Court considered the UK’s implementation of the third sentence of Article 11 of the EU Enforcement Directive.

This was supposed to extend Article 8(3) of the Information Society Directive from just copyright to all forms of intellectual property, but the UK did not enact this into national law.

In defence, the ISPs argued that the UK’s failure to implement the third sentence of Article 11 of the EU Enforcement Directive meant that injunctions could not be granted based on trademark infringement. However Richemont claimed that Section 37(1) of the Senior Courts Act 1981, regarding injunctive relief was sufficient.

 

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Arnold J held that under the “Marleasing principle”(where courts must interpret national law in light of any relevant directive as far as it is possible), trademarks should be covered.

“I conclude that, even if the court would not have power to grant a website blocking injunction in a trademark case upon a purely domestic interpretation of section 37(1), section 37(1) can and should be interpreted in compliance with the third sentence of Article 11 by virtue of the Marleasing principle. If it were otherwise, the UK would be in breach of its obligations under the directive.”

In a 2011 report by Frontier Economics Ltd. quoted in the judgement, the sale of counterfeit and pirated products is put at approximately $960 billion a year by 2015.

COMMENT

Blocking injunctions are only one of various remedies available for brand owners to fight infringing websites e.g.

  • filing a domain name complaint if the website operates under a misleading name
  • disabling the website’s third party merchant services or online payment mechanisms
  • serving a takedown notice on the host of the offending content

The Judge said this was the first website blocking injunction against internet service providers awarded to a brand owner in the EU for a trademark infringement. This test is likely to be followed by other applications by Richemont and other trade mark owners, here and abroad regarding websites selling counterfeit goods.

If the ISPs are unsuccessful in any appeal, they would be unlikely to defend future cases, which could be brought using the simplified CPR Part 8 procedure.

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Professional Negligence: Court of Appeal underscores “reliance” essential for Negligent Misstatement

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Hunt & Ors v Optima (Cambridge) Ltd & Ors [2014] EWCA Civ 714

Overturning a judgment of the Technology & Construction Court, the Court of Appeal has decided that architects’ certificates  provided after the purchase of property could not be the foundation for negligent misstatement claims. The case restores the legal position limiting the duties of professional advisors. It also provides a helpful summary of the key components of claims against professionals, especially where consultants such as architects or surveyors are providing reports that are likely to be relied on by third parties, like purchasers, lenders and developers.

Background

The Claimants had bought flats on long leases. Later, serious defects were identified, and the Claimants sued the developer and a firm of architects for negligent misstatement. The developer had instructed the architects to inspect and certify the flats had been built to meet building regulations and that there were no defects. The reports were for consideration by the purchasers and their lenders within the conveyancing process. However, most of the certificates were not actually signed off until after exchange of contracts and for most of the purchasers, after completion.

 

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Original Decision

The judge at first instance held that the architects owed two freestanding duties of care in

  • carrying out the inspection of the flats with an architect’s skill and care
  • preparing accurate certificates.

This put a duty of care on the architects during the assessment stage, but before any report or representations. The judge found it no obstacle that the signed certificates were received by the purchasers only after exchange of contracts. The case appeared to widen professional duties more generally than previously understood.

Court Of Appeal’s Decision

Clarke LJ in giving the leading judgment said the earlier decision

‘…takes inadequate account of certain key principles….. reliance must follow representation…’.

Negligent misstatement

The CoA found that both reliance on the statement must be proved and further, that loss was suffered in consequence of the reliance. Here however, the purchasers could not have relied on the certificates when they exchanged contracts, because the certificates had not been completed by then.

Clarke LJ said that this

would involve imposing …. a duty to inspect arising out of statements which, at the time when the duty arose, they had not made“.

There was no separate duty owed to the purchasers for “negligent inspection”.

Warranty

Although the architects plainly owed contractual duties to its client, the developer, there was no implied contractual or tortious duty between the architects and third parties. The certificate itself stated that it was not a promise or guarantee. However, it is salutary to note that the architects did not apply for permission to appeal the awards made against them in favour of those purchasers who did receive certificates prior to proceeding with their purchase.

Conclusion

  • The previous understanding of the law has been reinstated. For liability to be established, a claimant has to prove that it suffered losses directly as a result of relying on a professional’s negligent misstatement.
  • The court was reluctant to imply collateral warranties between professionals and third parties.
  • Professional firms’ Terms & Conditions should specify that any duty is limited to providing the final report and does not extend to preparatory work.
  • Solicitors acting for purchasers (and lenders) must ensure such certificates or reports are finalised and signed before any contracts are exchanged or loan completedn completed.

 

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INHERITANCE DISPUTES: NO WILL? NEW INTESTACY RULES APPLY

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The Inheritance and Trustees’ Powers Act 2014

For anyone who dies without a Will after 1st October 2014, new rules apply. Up to two thirds of adults don’t have a Will, and thousands of people die “intestate” every year. The Inheritance and Trustees’ Powers Act 2014 (“ITPA 2014”) follows a six year investigation by the Law Commission.

Many people don’t get round to making a Will, are put off, or don’t know that key events in life like getting married or a civil partnership can revoke an existing Will. The intestacy rules then apply. These fix the distribution of a deceased’s estate once debts and liabilities, funeral expenses and costs of the administration of the estate have been paid

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KEY CHANGES

(References to “spouses” and “marriage” include same-sex spouses and civil partners respectively).

a/ If you are survived by a spouse and children

The spouse takes all the assets in joint names, all your personal possessions, the first £250,000 outright, and half the remainder. The other half of the remainder goes to the children equally at 18.

Previously, a surviving spouse would receive a statutory legacy of the first £250,000; any remaining amount would be split in two. Half went to the surviving spouse as a “life interest” reverting to the children on the surviving spouse’s death. The other half went to the surviving children immediately.

b/ If you are survived by a spouse but no children or grandchildren

The spouse takes the whole estate, even if your parents or brothers and sisters survive you. Extended family will no longer have an interest. Previously, the spouse had to share the remaining estate (after payment of a £450,000 legacy to the spouse) with the deceased’s parents (if living) or full siblings (and their descendants). Under ITPA 2014 the spouse receives the whole of the estate. Most would regard this as fairer to the spouse and usually what the deceased would have wished.

c/ If you don’t have a spouse but you do have children

The remaining rules are unchanged, so the children share the estate equally between them.

d/ If you don’t have a spouse and you don’t have children

Remaining family members inherit the whole estate (equally between them if there is more than one, e.g. you have two surviving parents) in the following order:

  1. parents
  2. brothers and sisters of the whole blood and the offspring of any predeceased
  3. brothers and sisters of the half blood and the offspring of any predeceased
  4. grandparents
  5. aunts and uncles of the whole blood and the offspring of any predeceased
  6. aunts and uncles of the half blood and the offspring of any predeceased and,
  7. finally, if there are none of the above then the estate goes to the Crown.

For someone whose parents were not married, if both names are on the birth certificate, then they are both parents for the purposes of inheritance.

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WINNERS & LOSERS

  • Children of wealthy families where a parent dies intestate will receive less under the new rules than before. Spouses are the main beneficiaries of an intestate’s estate under the new Act.
  • Where there are no children, other relatives of the intestate individual (like siblings, parents and cousins), will no longer automatically inherit part of their estate.

FAMILY PROVISION

Certain family members and dependents can apply to the court for a share (or larger share) of a deceased’s estate under the Inheritance (Provision for Family and Dependants) Act 1975 (“IPFD 1975”) where they can prove there is no “reasonable financial provision”.

Although making a Family Provision claim can make a difference, this depends on litigation, which can be expensive. It is preferable to consider any potential claims when making a Will because decisions taken then can stop such disputes arising once it’s too late.

The 2014 Act does make a number of amendments to IPFD 1975 permitting close family and dependants of the deceased to make a claim for provision from the estate where they have not been provided for.

Classes of claimant will be extended to include any person who was treated by the deceased as a child of the family, not only in relation to a marriage or civil partnership, but in relation to any family in which the deceased had a “parental role”.

Changes also apply where someone is treated as being “maintained” by the deceased. Previously, a person would be treated as being maintained by the deceased if the deceased was, otherwise than for full valuable consideration, making a substantial contribution towards that person’s reasonable needs. Now, the words

“otherwise than for full valuable consideration”

are deleted. This prevents a claim failing where there was some give and take economically in the household.

WHAT IS NOT COVERED

  • The intestacy rules don’t recognise a deceased person’s step-children, only their natural, adopted or illegitimate children.
  • Whilst the rules give some protection to married couples and civil partners, both partners or co-habitees should have a Will to ensure that their wishes are carried out.
  • Entitlement under the Intestacy Rules only applies to couples who are married or in a civil partnership. Other couples who are co-habiting have no protection. Anyone who is co-habiting with a partner who wants to provide for them on death must make a Will. If not, your estate passes to your relatives or, failing that, to the Crown – unless your partner can make a claim for financial provision to be made on the ground that they were financially dependent on you.

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MAKING A WILL OVERRIDES THE INTESTACY RULES

  1. People should still always make a Will rather than rely on the Intestacy Rules. These are only a fall back where there is no valid Will, and are inevitably rough and ready, often very different to what the deceased may have wanted or assumed would happen.
  2. Making a Will not only ensures that your wishes are complied with, but it can also help to minimise the tax burden when you die. In addition, Administration in an Intestacy can be slower and more expensive.
  3. For unmarried and co-habitating couples, having a Will is equally, if not more important, as the rules for an unmarried surviving partner are unchanged; under the current and the revised intestacy rules, they are not automatically entitled to any of the estate.
  4. Often a Will saves surviving relatives an enormous amount of time, expense, uncertainty and possible disputes and litigation.

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Paul Sykes is a Contentious Trust and Probate Specialist registered with ACTAPS

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