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Critically evaluate, with reference to relevant case law and statute, how far this statement accurately reflects the current law relating to lifting the veil of incorporation.

Introduction

Salomon v Salomon ^[1] involved the principle of separate corporate personality. This states that as a general rule a limited company’s shareholders are not liable for the company’s debts beyond the nominal value of their shares^[2]. However, in certain situations courts have ignored this principle^[3]. Courts have done this under statute, during wartime, where there is an agency or trust arrangement, where the company was a sham, or when dealing with groups of companies. Recent decisions such as Adams v Cape Industries plc^[4] and Prest v Petrodel Resources Ltd^[5] have reaffirmed the principle in Salomon. However, courts have still been willing to ignore the Salomon principle, most notably in Chandler v Cape plc^[6].

Salomon v Salomon

Salmon v Salomon is an important case, as it established the principle that a limited company has a separate legal personality from its members. This is enshrined in s.74(2) Insolvency Act 1986, which states that in a company limited by shares, no member (or shareholder) is liable for any of the company’s debts other than the amount (if any) on any unpaid shares. This is a great incentive for investors, who know that even if a limited company in which they own shares, owes millions of pounds in debts, their own personal assets are safe^[7].

In Salomon a sole trader incorporated his business into a limited company. When the company failed, the liquidators argued that Salomon and the company were effectively one and the same. However, the House of Lords said that the company was a legal entity distinct from its members. Therefore, Salomon himself was not liable for the company’s debts. This separation between members and company is called the ‘corporate veil’.

Corporate personality means that a company can sue and be sued in its own right and be a party to contracts, and exist after the death of its shareholders^[8]. This was recognised by the House of Lords in VTB Capital v Nutritek Intl Corpn^[9] where Lord Neuberger said: ‘A company should be treated as being a person by the law in the same way as a human being.’ Therefore, the Salomon principle remains an important part of corporate law today.

Lifting the veil

However, there are several exceptions to this principle. In these cases courts ‘lift the corporate veil’ to make members liable for the actions of the company^[10]. This undermines the notion that Salomon occupies the centre stage in corporate law today.

Statute

s.213 Insolvency Act 1986 states that if, while winding up a company, the company’s business is carried on with intent to defraud the company’s creditors, a court may order any person knowingly carrying on the business to contribute to the company’s assets. This goes against Salomon, as it holds the company’s members responsible for its debts. However, it requires evidence of dishonesty^[11]. This is difficult to prove.

s.214 Insolvency Act 1986 states that if, while winding up a company, a director ought to have seen that there was no reasonable prospect of avoiding insolvency but continued to carry on business, then a court may hold them liable. There is no need for any dishonesty. However, this only applies to ‘directors’ and not shareholders. Even so, the Companies Act 2006 states that a ‘director’ includes a ‘shadow director’, which includes anyone other than a professional advisor in accordance with whose directions or instructions the directors of the company are accustomed to act^[12]. This could include a parent company if they have direct control over one of their subsidiary companies. Therefore, in a limited way, this restricts the Salomon principle where there is wrongdoing involving the company.

War

Courts may also ignore the corporate veil during wartime. In Daimler Co Ltd v Continental Tyre and Rubber Co (Great Britain) Ltd^[13] a company was incorporated in England but the vast majority of its members were German. The House of Lords stated that whether a company was an enemy in wartime depended upon those who were in control of the company. This goes against the principle of separate corporate personality and weakens the idea that Salomon is always to be followed.

Sham

Courts have also ignored the corporate veil where a company is a sham designed to commit fraud or avoid an existing contractual obligation. For instance, in Gilford Motor Co v Horne^[14] the defendant was a former director of a company who signed an agreement that he would not solicit his former employer’s customers. Instead, he and his wife incorporated another company which he used to breach the agreement. The court held that the second company was simply ‘a cloak, or a sham’ and held the defendant liable.

However, courts will not lift the veil if the company is set up to avoid future liabilities^[15]. Some commentators also argue that these cases do not involve lifting the corporate veil at all. Mayson, French and Ryan state that even if the agency used to commit the fraud or evade the obligation had been another person rather than a company, the result would have been the same^[16]. The court in Gilford recognised this by making orders against both the defendant and the company. If this is correct, these cases do not necessarily go against Salomon v Salomon.

Agency

Courts have also ignored the veil where they have found an agency relationship existed. In Re FG Films Ltd^[17] a company sought a declaration that it had made a British film for financial reasons. The court held that in fact the UK company was only the agent for an American company which owned the vast majority of its shares. The UK company also had no place of business and existed only so that the film could be called ‘British’. The court, therefore, lifted the veil.

However, this has been criticised by commentators who note that, if this is correct, a court could infer an agency relationship merely from the act of being a shareholder^[18]. Therefore, this High Court case seems to be wrongly decided, and the House of Lords decision in Salomon remains the higher authority.

Trusts

Courts have also ignored the corporate veil where they have found a trust relationship exists. In Trebanog Working Men’s Club and Institutive Ltd v MacDonald^[19] an incorporated club was charged with selling liquor without a licence. The court held that as the members owned the liquor between themselves, there was no actual ‘sale’, and the club was simply a trustee of the liquor for its members. However, this contradicts an earlier case where the opposite decision was reached^[20], and commentators note that this argument is ‘at best tenuous’^[21]. Therefore, this probably does not undermine Salomon.

Groups

Case law is more contradictory as to whether groups of companies will be treated as another exception to Salomon. In a group, the parent company can own a number of subsidiary companies and still have separate corporate personality from them^[22]. Traditionally, courts have held that this is a legitimate use of the corporate form, and that each company in a group is a separate legal entity^[23]. However, in DHN Food Distributors Ltd v Tower Hamlets LBC^[24], Denning MR in the Court of Appeal held that a parent company and its subsidiaries were a ‘single economic entity’ as the subsidiaries were ‘bound hand and foot to the parent company’, so the group was the same as a partnership. This undermines the Salomon principle.

In Woolfson v Strathclyde Regional Council^[25], the House of Lords disapproved of Denning’s comments and said that the corporate veil would be upheld unless the company was a facade. The DHN case approach has become less popular since then^[26]. Commentators also note that the DHN case is self-contradictory^[27]. Denning refers to the subsidiaries as being ‘bound hand and foot’ to the parent company, which implies the parent has control, but he also says they are ‘partners’, which implies they have equal power. Therefore, it seems unlikely that DHN will be followed in future, especially given the Court of Appeal’s later decision in Adams v Cape Industries plc.

Cases that support the Salomon principle

In Adams v Cape an English company was sued for the actions of one of its subsidiaries abroad. The subsidiary had caused injury to its workers through asbestos exposure. The Court of Appeal held that the parent company was not liable. The court held that the subsidiary was not a facade or sham as the group had been structured that way only to minimize future liabilities. The court also rejected the argument that the subsidiary was an agent for the parent company, as the subsidiary was carrying on its own business. Finally, the court held that there was no general principle that all the companies in a group should always be treated as a single economic entity.

This reaffirms the Salomon principle. In fact the court in Adams stated that DHN could be explained as a matter of statutory interpretation of the regulations regarding compulsory purchases at the time, and hence it did not actually involve lifting the corporate veil. Dignam says: ‘Gone are the wild and crazy days when the Court of Appeal would lift the veil to achieve justice irrespective of the legal efficacy of the corporate structure’^[28]. Therefore, Adams restores the primacy of Salomon v Salomon.

This is supported by the recent Supreme Court decision in Prest v Petrodel Resources Ltd, where a divorced wife claimed shares in houses owned by companies in which her ex-husband was the controlling shareholder. She asked the court to lift the corporate veil and treat her ex-husband and the companies as being effectively the same. However, the court held that the veil could not be lifted without evidence of impropriety. The setting up of the companies had nothing to do with the marriage breakdown. Therefore, the court refused to lift the veil.

Lord Sumption stated that the veil could only be lifted if there was a legal right against the controller of a company and the company’s separate legal personality frustrated that right^[29]. Also, it must be necessary for the court to lift the veil on public policy grounds. Critics have noted that it is very unlikely that these requirements will be met^[30]. Also, although Lord Sumption’s comments were obiter, they have been cited with approval in other cases and are therefore likely to be authoritative^[31]. However, Baroness Hale in the same case did not agree, saying that she believed there were more cases where the veil could be lifted^[32]. Therefore, the judgments are contradictory.

In the end, the court decided that the properties were held on resulting trust for the ex-husband and could be claimed by his ex-wife. This arguably achieves the same thing as if the court had lifted the veil. Consequently, all that can be said is that the case does not rule out ignoring Salomon in cases involving groups of companies.

A new attitude?

Another exception to Salomon involves tortious liability. In Chandler v Cape the claimant had also contracted an asbestos-related disease while working for a subsidiary of the parent company. This time the Court of Appeal held the parent liable in the tort of negligence. The court held that the parent would be liable if the parent and subsidiary were in the same business, the parent had superior knowledge of health and safety in that industry, the parent ought to have known the subsidiary’s system of work was unsafe, and the parent ought to have foreseen that the subsidiary would rely on the parent’s superior knowledge.

This undermines the Salomon principle. However, critics note that Cape had an unusual business organisation where it was deeply involved in the day-to-day supervision of the subsidiary’s health and safety policy. Therefore, the case may turn out to be ‘Cape specific’^[33]. For instance, in a later case with similar facts but concerning a different company, the Court of Appeal refused to hold the parent company liable^[34].

In Chandler Lady Hale also emphatically rejected that this was a case of corporate veil lifting, saying that the parent had instead assumed a direct duty of care for the employee. In view of this, some critics state that the case may not be setting any useful precedent^[35]. However, others view this clearly as veil lifting, regardless of how the court justified this^[36].

These commentators believe that this suggests that the Court of Appeal is now more willing to lift the veil where there is a group of companies and it is in the interests of justice^[37]. However, this was rejected in Adams v Cape. Even so, in Conway v Ratiu^[38] the court again said there was a ‘powerful argument’ for lifting the veil where it ‘accords with common sense and justice’. Unfortunately, this case is per incuriam as it did not refer to Adams v Cape and is probably wrong. Even so, in Lubbe v Cape Plc^[39] the House of Lords were ready to lift the veil in the interests of justice in facts similar to Adams v Cape, as the foreign jurisdiction where the tort occurred was not an appropriate place to try the matter. Therefore, there is authority for lifting the veil when justice demands it.

In following Lubbe, the court in Chandler v Cape achieved justice, as the victims would otherwise have been denied a remedy. This is important where the subsidiary no longer exists or has any assets^[40] or with asbestos claims where the disease may not show up for many years^[41]. The Supreme Court in Prest v Petrodel was also concerned with achieving justice for the claimant^[42], and in the VTB case Lord Neuberger said: ‘it may be right for the law to permit the veil to be pierced in certain circumstances in order to defeat injustice’^[43].

Therefore, it seems that the courts are willing to disregard the Salomon principle in some cases involving personal injury or groups of companies. This seems fair, as limited liability encourages subsidiary companies to take risks, knowing that the shareholders of the parent company in effect get double protection from creditors should anything go wrong^[44]. To hold otherwise would have been to deny justice to the claimant in Chandler v Cape.

Conclusion

The principle of separate corporate personality and the corporate veil recognised in Salomon v Salomon remains central to corporate law despite several challenges. However, there are certain exceptions when the veil will be lifted. Most notably these include under statute, during wartime, and where the company is a sham. It is less likely to be lifted where it is argued that an agency or trust relationship existed between the company and its controller. Where groups are involved, Salomon remains the starting point. However, courts have been more willing to lift the veil recently, especially where personal injury is involved or justice demands it, even if they do not say so explicitly. This seems fair, as otherwise shareholders enjoy double protection.

BIBLIOGRAPHY

Legislation

Companies Act 2006
Insolvency Act 1986

Cases

Adams v Cape Industries Plc [1990] Ch 433 (CA)
The Albazero [1977] AC 774 (HL)
Chandler v Cape Plc [2012] 1 WLR 3111 (CA)
Conway v Ratiu [2005] EWCA Civ 1302 (CA)
Daimler Co Ltd v Continental Tyre and Rubber Co (Great Britain) Ltd [1916] 2 AC 307 (HL)
DHN Food Distributors Ltd v Tower Hamlets LBC [1976] 1 WLR 852 (CA)
Re FG Films Ltd [1953] 1 WLR 483 (Ch)
Gilford Motor Co Ltd v Horne [1933] Ch 935 (CA)
Lubbe v Cape Plc [2000] 1 WLR 1545 (HL)
Re Patrick and Lyon Ltd [1933] Ch 786 (Ch)
Prest v Petrodel Resources Ltd [2013] UKSC 34 (SC)
Salomon v A Salomon & Co Ltd [1897] AC 22 (HL)
Thompson v Renwick Group Plc [2014] EWCA Civ 635 (CA)
Trebanog Working Men’s Club and Institutive Ltd v MacDonald [1940] 1 KB 576 (KB)
VTB Capital v Nutritek Intl Corpn [2013] UKSC 5 (SC)
Woolfson v Stathclyde Regional Council [1978] P & CR 521 (HL)
Wurzel v Houghton Main Home Delivery Service Ltd [1937] 1 KB 380 (KB)
Other Sources
Anon, ‘Case Comment: Chandler v Cape Plc: is there a chink in the corporate veil?’ (2012) 18(3) HSW 1
A Dignam, Hicks and Goo’s Cases and Materials on Company Law (7th edn Oxford University Press, Oxford 2011)
D French and S Mayson and C Ryan, Mayson, French & Ryan on Company Law (27th edn Oxford University Press, Oxford 2010)
J Fulbrook, ‘Chandler v Cape Plc: personal injury: liability: negligence’ (2013) 3 JPIL C135
L Sealy and S Worthington, Company Law: Text, Cases and Materials (9th edn Oxford University Press, Oxford, 2010)
L Stockin ‘Piercing the corporate veil: reconciling R. v Sale, Prest v Petrodel Resources Ltd and VTB Capital Plc v Nutritek International Corp’ (2014) 35(12) Company Lawyer 363
C Taylor, Company Law (Pearson Education Ltd, Harlow 2009)
Footnotes
[1897] AC 22 (HL).
L Sealy and S Worthington, Company Law: Text, Cases and Materials (9th edn Oxford University Press, Oxford, 2010) 51.
A Dignam, Hicks and Goo’s Cases and Materials on Company Law (7th edn Oxford University Press, Oxford 2011) 28.
[1990] Ch 433 (CA).
[2013] UKSC 34 (SC).
[2012] 1 WLR 3111 (CA).
C Taylor, Company Law (Pearson Education Ltd, Harlow 2009) 26.
Ibid 27.
[2013] UKSC 5(SC)
Sealy and Worthington (n2) 51.
Re Patrick and Lyon Ltd [1933] Ch 786 (Ch).
s.251 Companies Act 2006.
[1916] 2 AC 307 (HL).
[1933] Ch 935 (CA).
Adams v Cape Industries Plc [1990] Ch 433 (CA).
D French and S Mayson and C Ryan, Mayson, French & Ryan on Company Law (27th edn Oxford University Press, Oxford 2010) 136.
[1953] 1 WLR 483 (Ch).
Sealy and Worthington (n2) 59.
[1940] 1 KB 576 (KB).
Wurzel v Houghton Main Home Delivery Service Ltd [1937] 1 KB 380 (KB).
Sealy and Worthington (n2) 60.
Taylor (n7) 31.
The Albazero [1977] AC 774 (HL).
[1976] 1 WLR 852 (CA).
[1978] P & CR 521 (HL).
Taylor (n7) 34.
French, Mayson and Ryan (n16) 145.
Dignam (n3) 40.
Para 35.
L Stockin ‘Piercing the corporate veil: reconciling R. v Sale, Prest v Petrodel Resources Ltd and VTB Capital Plc v Nutritek International Corp’ (2014) 35(12) Company Lawyer 364.
Ibid, 363.
Para 92.
J Fulbrook, ‘Chandler v Cape Plc: personal injury: liability: negligence’ (2013) 3 JPIL C138.
Thompson v Renwick Group Plc [2014] EWCA Civ 635 (CA).
Fulbrook (n33) 138.
Dignam (n3) 46.
French, Mayson and Ryan (n16) 150.
[2005] EWCA Civ 1302 (CA).
[2000] 1 WLR 1545 (HL).
Anon, ‘Case Comment: Chandler v Cape Plc: is there a chink in the corporate veil?’ (2012) 18(3) HSW 2.
Ibid.
Stockin (n30) 365.
Para 127.
Dignam (n3) 49.

This work was produced by one of our professional writers as a learning aid to help you with your studies

With reference to the legal rules relating to offer and acceptance of a contract, advise the club whether it can claim the joining fee from Mary, Frank and Ali.

Mary posted her application. She telephoned the club to confirm whether or not her application was accepted but was unable to get through to speak to anyone. In the meantime the committee took two months to confirm whether or not they would accept her application based on a character investigation.

In accordance with the legal stipulations of offer and acceptance Mary is under no obligation to pay her joining fee for a number of reasons. Although she returned her application form the offer of membership was not formally accepted as she failed to contact the club secretary when she was told to telephone. This meant that she wasn’t provided with an answer to the outcome of her application, the time of which was made very clear in terms of when she needed to do this by yourselves. Legally ‘an agreement is reached when an offer by one party is unequivocally accepted by the other’.

Which did not occur. You do not confirm whether the club actually wrote to Mary in September when the decision was made to accept her. If this was not done and payment was merely requested on the basis that Mary Jones had been granted membership, once again she would not be liable as Australian Law dictates that a person cannot accept an offer of which he/she has no knowledge. And considering the club waited over two months to inform Mary, she had no understanding that she had ever been considered in the first place. Additionally silence cannot be construed as acceptance.

The club was not within its rights to assume that Mary would accept the offer, having failed to communicate with them by telephone and not receiving confirmation until several months after the membership cut-off date. In the English case of Felthouse and Bindley, the courts ruled against Felthouse who had considered the horse he had acquired for his own, on the basis that his Nephew had not written to confirm otherwise. He lost the case because the court confirmed there had been no acceptance of a contract.

Frank’s case is similar in that he never contacted the club secretary to confirm his membership, therefore no official acceptance was made. In addition he had stipulated in writing that his terms of agreement were related to gaining a contract of work from the club. Because this written condition was not agreed to, Frank was within his rights not to have to pay for membership. Additionally and somewhat ironically correspondence with offer, or the ‘mirror image rule’ states that if you accept an offer it must be accepted exactly as it is offered, without any modifications. This being the case Frank’s offer had already turned into a null and void counter-offer as soon as he wrote the condition of interest, on the understanding that he would receive a contract of work by way of membership.

The “mirror image rule” states that if you are to accept an offer, you must accept an offer exactly without any modifications; if you change the offer in any way, this is a counter-offer that invalidates the original agreement.

Once again no formal agreement has been instigated by Ali as he failed to contact the secretary to discuss or accept membership. He would have assumed that his membership was disregarded as it was late and he never received written confirmation.

However his assumption of failure to be invited to membership may not be enough in terms of rendering Ali not culpable. When he posted the letter he was in effect accepting the offer. Likewise although the letter of agreement never found its way to him it was physically sent by the club. Ali also followed up his request to apply for membership over the telephone, thus legitimizing his desire to join.

By law if an offer is accepted by post, the contract becomes valid at the time it was posted. As with the well documented case of Adams v Lindsell, which determined that a posted acceptance is contractually binding. But it did arrive after the stated and agreed deadline which would no doubt make him non eligible for payment of membership fees.

Suppose that Tony is determined to take Court action and is looking for cases to support his arguments. Identify ONE case that may help support Tony’s demands that he be accepted as a member to the club and explain to him, with reasons, how a Court in your state of Australia is likely to treat this previous case. As part of your answer you should discuss what parts of the case are important and what parts are not.

With regard to your contesting the outcome of the Tennis Club to accept you as a member. Bearing in mind that you sent your letter well within the deadline date for which membership would be considered; only to be refused on the basis that your application arrived late due to a postal strike, there may be a case for us to adopt the approach of the Postal Acceptance Rule.

This is an exception in law to the principal that the offeree (In this case yourself) communicates your acceptance to the Offeror. (The Country Tennis Club). In this instance acceptance is granted when the letter stating acceptance is actually posted and

not when it is received by the offeror. The most famous case for determining this law was by way of Adams vs Lindsell in 1818. Lindsell (the defendant) wrote to Adams (the plaintiff) to make him an offer of some wool and asked for an agreement for this sale to be issued by return of post which Adams provided.

However Lindsell’s original letter arrived late as he managed to address it incorrectly. Thus Linssell automatically assumed that his offer had been rejected having waited so long for a response. He consequently decided to sell the wool on to another buyer. The problem arose as this exchange took place after Adams had already replied to say that he would indeed buy the wool and he was expecting to receive it.

The court in this case ruled in favour of Adams and it was deemed that the date of agreement was made from when he posted the letter back requesting the wool and not when it arrived, which was in this case too late.

This has a striking resemblance to your own situation. The court imagined that this would elevate the issues concerned when each individual is waiting for a receipt of confirmation, which can hinder business. The law has been criticized for having ulterior motives that were connected with publicizing the post office in the nineteenth century, although it does seem feasible that it was a law passed to aid the practicalities of business efficiency. But it does place the offeror in a vulnerable situation as they are often bound by contract without even being aware of it.

This is not a completely straightforward law as it does only apply to acceptances and no other type of communication and only where it is reasonable that this acceptance needs to be made by post. This makes a good case for you against the club as you were responding to their requests. Saying that this particular rule can always be displaced by the offeror if they request that the offer takes a specific form, for example a speedy reply or a deadline, which means it cannot take effect on arrival as the deadline has passed. Which makes your case unfounded. However what is stipulated in this law as reiterated in the case of Henthorn v Fraser

‘Where the circumstances are such that it must have been within the contemplation of the parties that, according to the ordinary usages of mankind, the post might be used as a means of communicating the acceptance of an offer, the acceptance is complete as soon as it is posted’

is the need for the offeror to consider what is reasonable to expect in the case of making an offer available. In other words it is very conceivable that the Tennis club will be liable by way of neglecting to take into consideration the potential disruption or inevitable delays that might arise through the postal system or any extenuating circumstances whereby the application might be received slightly later than anticipated. Because the Tennis Club failed to put in place these obvious influencing factors they should by law be obliged to provide you with the membership that you applied for within the designated time given.

3). Suppose that the Club’s constitution provides that “any member who fails to pay any money owed to the club promptly and in full will be subject to imprisonment on the premises for six days for each offence and during this time must scrub the kitchen with a toothbrush”. Assuming Mary refuses to pay, can the club enforce this provision of its constitution against her? Why or why not? (30 marks)

No Mary would not be subjected to this type of punishment as she is not officially a member of the club and the constitution clearly states ‘any member’. She has not officially accepted membership therefore she is not liable to carry out the actions requested.

A constitution in this sense establishes the laws and principles of the club itself which do not infringe on the external it reflects a temporary law or measure which has little power in the external world around its governing area. In this case the club constitution is limited to the confines and members of its club.

A constitution is defined as ‘a set of rules which governs an organsation. Every organization, whether social club, Trade Union or nation state, which has defined objectives and Departments or offices established to accomplish those objectives, needs a constitution to define the powers, rights and duties of the organizations members’

In a club, such as the Country tennis Club members have to obey the laws and house rules as laid down in the constitution. But only as members of the club. The extent by which the members are controlled is dependent on the constitution. What it does not have is the power to force its members to carry out things against their will.

As with any constitution, it can discriminate and create its own internal laws which might have an affect on those trying to seek membership. It represents an internal oligarchy that control their own small governing group which has no legal standing in terms of enforcing its own rules directly onto external individuals, although this may be indirect as mentioned before in terms of prejudice or discrimination against those people it wants as its members and those it chooses not to accept.

In addition the nature of this constitution, regardless of its company policies and rules it is infringing on civil and human rights issues. The fact that the Tennis Country Club constitution expects degrading and humiliating activities to be performed by its members is both unacceptable and contravenes a number of laws. Examples of some of these laws in Australia include those thought to encourage Societal Abuses and Discrimination, The Right of Association.

The law also provides all workers and public servants with the right of association domestically and internationally and protection ‘against antiunion discrimination, and workers exercised these rights in practice’ One point to note is that Australia has no Federal Bill of Rights. However it does have one of the best human rights records in the world.

So even if Mary was for some reason expected to make payment for her club membership and then refused, even if membership had been granted, yet not accepted. Under any of these extenuating circumstances she would be well within her rights to report the club for at the least anti-social behavior, at worst for crimes against human and civil rights.

Bibliography

Tillotson, J.Contract Law in Perspective: Routledge; 1995

Suff, M. Essential Contract Law: Cavendish Publishing; 1997

Nixon, A, Wolstenholme Holland, R.Commercial Law: Longmans, Green and Co; 1907

Frey, M.A, Hurley Frey, P. Essentials of Contract Law: Thomson Delmar Learning; 2000

Stone, R. The Modern Law of Contract: Routledge Cavendish; 2005

Stone, R. The Modern Law of Contract: Routledge Cavendish; 2005

Stone, R.The Modern Law of Contract: Routledge Cavendish; 2005

Barnett, H.Constitutional & Administrative Law: Rutledge Cavendish; 2004

Harriman, E.A.The Constitution at the Cross Roads: A Study of the Legal Aspects of the League of Nations, the Permanent Organization of Labor and the Permanent Court of International Justice: The Lawbook Exchange, Ltd; 2003

Australian Human and Civil Rights. Available at: http://home.vicnet.net.au/~victorp/vphuman.htm Accessed August 26, 2008

This work was produced by one of our professional writers as a learning aid to help you with your studies

“In view of a justification defence to both direct and indirect discrimination, the law will continue to do little to prevent age discrimination.” Critically evaluate this statement as a reflection of the current position of the law in this area.

Date authored: 21 ^st July, 2014.

The current law on discrimination is laid down in the Equality Act 2010. Age is one of the protected characteristics within the Act. [1] The term ”Age” refers not only to a person’s age, but also to persons in a particular age group.[2] The Equality Act stipulates that direct discrimination occurs where a person treats less favourably another due to the latter’s protected characteristic. [3] Thus, there must be a comparator to compare with. If one does not exist, the court would create an imaginary comparator. The comparator must be in the same or not in a materially different position from the plaintiff in all aspects with the exception of being a member of the protected class.[4] The comparison exercise must be reasonable. [5] The Tribunal applies an objective test for less favourable treatment.[6] Indirect discrimination can be claimed where there is an ostensibly neutral provision, criterion or practice which indirectly discriminates against the claimant. [7] The indirect discrimination provisions are aimed to tackle ”disguised age barriers” rather than barriers stemming from retirement. Thus, the fact that an individual cannot obtain a qualification needed for a promotion before retirement does not mean that he has been discriminated against. [8]

In contrast to other forms of direct discrimination, direct age discrimination can be justified. Although the motive for discriminating is irrelevant, [9] the employer could raise a defence that the discriminatory acts were proportionate means of achieving a legitimate aim. [10] Legitimate aims and proportionality are distinct issues which must be examined by separately by the Tribunal.[11] Indirect discrimination is justified using the same principle. The Tribunal must strike an objective balance between the discriminatory effect of the provision and the reasonable needs of the business. There must be a need for the provision and it must be reasonably necessary. [12]

The peculiarities of age as a protected characteristic should be pointed out. Age discrimination includes a wide range of objective justifications unlike sex discrimination where there are very few and race discrimination where there are virtually none. This is logical given the fact that age discrimination is related to many complex issues such as retirement, business needs or working culture. Such peculiarities superficially imply that in most occasions, the employer’s policies would be justifiable and age discrimination claims should be a response only to the most heinous conduct. Even though direct discrimination claims are becoming a rare phenomenon as most companies have developed solid equal opportunities policies and training, there have been several recent direct age discrimination cases where managers have made discriminatory remarks in view of the employee’s performance. [13] Furthermore, a 2012 DWP report pointed out that age-related assumptions and stereotypes are still prevalent in the UK. [14] Thus, a careful balancing act between the employer’s legitimate aims and the severity of the discriminatory measure is prudent.

The background of the current legislation should also be considered. The Equality Act 2010 is a consolidating legislation, replacing the provisions of the Employment Equality (Age) Regulations 2006 which implemented the Equal Treatment Directive. In that regard, the objective justification defence is a recognised concept in EU Law. InIncorporated Trustees of the National Council on Aging v Secretary of State for Business, Enterprise and Regulatory Reform (the Hayday case) [15] The European Court of Justice acknowledged that it is acceptable to derogate from the provisions of the Equal Treatment Directive [16] relating to age discrimination in situations where there are legitimate public interest objectives. The means of implementing the objectives must be appropriate to the aim and reasonably necessary for its achievement. [17] The Court has recognised legitimate objectives such as inter-generational fairness and dignity. A policy, criterion or provision which is justified based on staff retention and workforce planning meets the inter-generational fairness objective. Avoiding the necessity to dismiss older workers on the basis of incapacity or underperformance has been directly related to the dignity objective. Avoiding the need for expensive and divisive disputes about capacity and underperformance would also meet said aim. However, it is recognised that direct and indirect age discrimination cannot be identically justified. [18]

Age Discrimination and Retirement

An example of a discriminatory but justifiable provision is a legislation permitting compulsory retirement on the ground of age. The European Court has held that said legislation was necessary for checking unemployment and encouraging recruitment. [19] A compulsory retirement clause for partners in a law firm has also been justified on the grounds that it allowed associates of the firm the opportunity of partnership after a reasonable period; facilitated the planning of the partnership by having a realistic long term expectations as to when vacancies would arise; and limited the need to expel partners by way of performance management, which contributed to the collegiate environment within the firm. [20]

In Harrod v Chief Constable of West Midlands Police the authority applied a compulsory retirement provision within the Police Pensions Regulations 1987 to force a large number of officers to retire. Generally, a discriminatory practice is not justifiable on the basis of cost but may be justified on the basis of efficiency. However, the distinction between the two can sometimes be blurred. Improving efficiency was accepted by the Tribunal as a legitimate aim. However, the measure was disproportionate. The discriminatory practice was applying the Regulation to all officers only because they were within its ambit. There were other less discriminatory alternatives such as voluntary retirements, part-time working and career breaks, which were not considered.[21]

In Bloxham v Freshfields Bruckhaus Deringer[22] the Tribunal held that Bloxham had been treated less favourably than partners aged 55 or over as, being only 54, he was subject to a 20 per cent reduction. However, modification of the pension scheme to make it more financially sustainable and fairer to younger partners was held to be a legitimate and necessary aim and the firm had successfully demonstrated that the amendments were a proportionate means of achieving this aim.

Access to Employment

Another example of a justifiable policy is restricting a job position to applicants over a certain age. [23] This constraint may be reasonable considering the requirements of the job in question. In the same spirit, the Equality Act recognises an exception to some of its provisions [24] relating to promotion and access to employment if the employer can demonstrate that age is an occupational requirement and that said requirement is a proportionate means of a achieving a legitimate aim. [25] This is particularly relevant for professions within the film or sports sectors.

Enhanced Redundancy Payments

The Equality Act permits employers to consider age as a factor when deciding whether to make an enhanced redundancy payment. [26] Although such practices may be prima facie discriminatory, there have been many cases of recognised justifications. For example, a redundancy scheme whereby payments are raised depending on age and length of service was held to meet legitimate aims.[27] Such aims were: encouraging loyalty, supporting older workers who are more vulnerable in the job market and providing an incentive to older workers to volunteer for redundancy, which would free senior posts for younger employees. In another example, the employer, DWP, justified an enhanced payment for older employees as part of a scheme by presenting evidence which demonstrated that older employees were unemployed for a longer period of time and had more family and financial responsibilities.[28] The aim of the enhanced payment policy was to provide proportionate monetary support until the employee finds other employment or retires. The court recognised that even though the scheme could have been made non-discriminatory at no extra cost by reducing the payments, this did not render the scheme disproportionate. This implies that there is no requirement that it is absolutely necessary to take into account whether there are alternative, less discriminatory measures. It was also recognised that due to the nature of the scheme, the individual circumstances of the claimant could not be taken into account. The caveat is that such subtleties may serve as a carte blanche for employers to discriminate on the grounds of age.

Dismissal due to Age

Although in both direct and indirect discrimination the Tribunal employs the same test, following Seldon v Clarkson Wright and Jakes [29] the employer must demonstrate a social policy aim not merely a private business aim to justify direct discrimination. Because of the more severe nature of direct discrimination, it is not illogical to argue that more scrutiny should be placed on the legitimacy of the employer’s objectives and the proportionality of its measures.

In O’Reilly v BBC[30] the plaintiff was successful in her claim for age discrimination. The company dismissed her in order to change the image of the Countryfile program to appeal to a younger audience. The tribunal acknowledged that this was a legitimate aim, but it held that the measure was disproportionate as it was not necessary to replace the plaintiff with younger presenters to achieve the aim. Similarly, in McCririck v Channel 4 Television Corporation [31] the claimant was dismissed in order to change the image of the program. An important distinguishing point in that case was that the defendants conducted a research exercise which identified negative views associated with the claimant’s image and character. No such research was carried out in O’Reilly. Moreover, Channel 4 considered the plaintiff’s personal qualities, particularly his reputation as holding old-fashioned views, which were indirectly linked with his age. [32] The Tribunal concluded that the defendants have used proportionate means.

An interesting point is that in McCririck, the decision to dismiss was justified by evidence and based to a larger extent on the plaintiff’s style and to a lesser extent on his age. In contrast, in O’Reilly, the decision was based primarily on the stereotype that the plaintiff could not appeal to a younger audience because she was older. This serves as an example of a situation where the law should intervene to protect the employee from counterproductive stereotypes which may, in certain situations, by disguised under neutral, ubiquitous policies.

In conclusion, the cases examined demonstrate the wide array of justifications within different contexts. Some of the justifications appear to be specific only to age discrimination. Objectives such as dignity may be unnecessarily vague particularly against the background of a company policy or scheme where the employee’s individual’s circumstances are seldom a relevant consideration. Justifications such as avoiding the need for costly and divisive disputes can be controversial in light of the potential harm suffered by the plaintiff. Medical research by Florida State University College of Medicine demonstrated that older people who perceive age discrimination experience lower physical and emotional health than people who perceive sex or race discrimination.[33] In that regard, cases such as O’Reilly and McCririck represent an illustrative example of the very thin line between a proportionate measure based on evidence and a measure based on stereotype.

Word Count: 1774

BIBLIOGRAPHY

Books

Bell, A; Employment Law (2^nd edn; Sweet & Maxwell, London 2006)

Honeyball, S; Honeyball & Bowers’ Textbook on Employment Law (11^th edn; Oxford University Press, Oxford, 2010)

Slewyn, N; Selwyn’s Law of Employment (16^th edn; Oxford University Press, Oxford, 2011)

Online Resources:

The Lawyer, ‘Age Discrimination Time for Revision’ http://www.thelawyer.com/download.aspx?ac=68830 accessed 20 July 2014

Legal Week Law, ‘ More than just a number – three key age discrimination lessons from recent cases ‘ http://www.legalweeklaw.com/download/-key-age-discrimination-lessons-recent-20289 Legal Week Law accessed 20 July 2014

Richard Lister, ‘Channel 4 dismissed John McCririck because of style, not age’ [2013] Lewis Silkin http://www.lewissilkin.com/Knowledge/2013/December/Channel-4-dismissed-John-McCririck-because-of-style-not-age.aspx#.U8w07vumXlQ accessed 20 July 2014

Table of Statutes

EC Directive 2000/78/EC

Employment Equality (Age) Regulations 2006

Equality Act 2010, c.5, c.13, c. 13(2), c.19,

c. 39(1) (a); c.39 (1) (c); c.39 (2) (b); c. 39(2) (c); Schedule 9, paragraph 1; Schedule 9, paragraph 13

Table of Cases

Bloxham v Freshfields Bruckhaus Deringer ET 2205086/2006

Clements v Lloyds Banking plc UKEAT/0474/13/JOJ

Eweida v British Airways [2010] EWCA Civ 80

Homer v Chief Constable of West Yorkshire Police [2010] EWCA Civ 419

Incorporated Trustees of the National Council on Aging v Secretary of State for Business, Enterprise and Regulatory Reform (the Hayday case ) [2009] All ER (EC) 619

James v Eastleigh BC [1990] 2 AC 751

James v Gina Shoes Ltd UKEAT/0384/11/DM

Lockwood v Department of Work and Pensions [2013] EWCA Civ 1195

MacCulloch v ICI plc [2008] ICR 1334

McCririck v Channel 4 Television Corporation ET 2200478/2013

O’Reilly v BBC ET 2200423/2010

Network Rail Infrastructures v Gammie (EAT (Scotland), 6 March 2009)

Palacios de la Villa v Cortefiel el Servicios SA [2008] All ER (EC) 249

Seldon v Clarkson Wright & Jakes [2012] UKSC 16

Shamoon v Chief Constable of the Royal Ulster Constabulary [2003] UKHL 11

Smith v Safeways Stores [1996] IRLR 456

Wolf v Staldt Frankfurt am Main [2010] IRLR 244

This work was produced by one of our professional writers as a learning aid to help you with your studies

The test which has become enshrined in law as the benchmark by which medical negligence is assessed follows the 1957 ruling in the case of Bolam v Friern Hospital Management ¹. Referred to since simply as the Bolam test it determined that a member of the medical profession will not be guilty of negligence if he or she exercised reasonable care in accordance with a practice accepted as proper by a responsible body of medical opinion. Therefore in order to satisfactorily defeat a claim of clinical negligence under Bolam a healthcare professional is required to do nothing more than adduce evidence from the respected peers from his or her speciality who agree with the standard of practice which is the subject of the action. This means that a defendant doctor will not be deemed to have been at fault providing his or her course of action is one that is professionally backed by colleagues despite the fact that other members of the medical may take an opposing view. This essay will examine the effect of Bolam and address the question of whether its precedent represents a relic from a bygone era which no longer has a place in a modern legal system or whether it adequately serves society by striking a necessary balance between the medical profession and the patients to whose care they are entrusted.

One of the main drawbacks of the Bolam test is that it gives legal sanction to a self-regulatory system that operates for the benefit of clinicians in that it is the medical profession themselves and not the courts that decide the yardstick by which reasonable practice is measured. In a departure from its usual role as arbiters of what proper standards of care should be the courts are consequently relegated to a passive, acquiescent role compliantly rubber stamping medically determined definitions of reasonable clinical practice. Bolam also provides a cloak of protection around medical practitioners in that it places an often insurmountable challenge on claimants to show that no responsible body of professional opinion exists that would advocate the course of conduct under question. Although doctors may take the view that the course of action being considered may not have been one that they would themselves have adopted they may feel reluctant to go further and go on record to officially opine that the conduct of a colleague was actually below the levels that should be expected. This obstacle to proving liability inevitably acts to discourage claimants from pursuing cases and renders it highly problematic for legal practitioners to advise on the likely success of the claims in those that do.

When examining the power and control Bolam affords the medical fraternity it perhaps comes as no surprise that its ruling came only nine years after the birth of the National Health Service when the appointed omnipotence and lofty pedestal upon which doctors were placed by a grateful public was at its highest and was reflected by judicial attitudes that viewed the risk of medical negligence as“a dagger at the doctor’s back” ². Bolam itself involved damages claimed for the injuries sustained by a patient during electro-convulsive therapy for the treatment of mental illness, a remedy which itself fell into serious disrepute and viewed as outmoded since the 1970’s. ³ It set the legal standard during a period in which the conduct of doctors went largely unchallenged and was automatically judged to be motivated by medical goodwill and professional integrity. ⁴

Post Bolam society has gradually undergone a radical and fundamental change with a wealthier and more educated and informed public and a doctor / patient relationship which has broadly transformed from that of humble appreciation to one of high demand and expectation. ⁵ Following a shift change towards a rights based society and the promotion of core values protecting the individual right to fair and just treatment the public increasingly expect a consistent and proper method of redress and regulation when systems are shown to have failed them. High profile and shocking scandals involving the corrupt, dishonest and even criminal behaviour of medical practitioners have also acted to massively shake public confidence and trust in a body of professionals previously presumed to operate only with the highest principles of morality and virtue. These include serious cases such as those of notorious murderer Dr Harold Shipman, Dr Andrew Wakefield who published a fraudulent research paper falsely claiming a link between the MMR vaccine and the appearance of autism and bowel disease, gynaecologist Rodney Ledward who was struck off for a number of offences including poor quality of clinical care and carrying out unnecessary medical procedures and that of Richard Neale another gynaecologist found guilty of failing to provide appropriate care to patients and lying about his qualifications. ⁶

In the four decades that followed Bolam its prerogative was largely unchallenged with any endeavours by the lower courts to expand on its principle proving futile and leading to a swift overrule and reinstatement by the House of Lords that the standard of care to be decided was a matter for medical judgement.⁷ However in the late 1990’s just prior to the introduction of the Human Rights Act 1998 and perhaps following a recognition of changing public attitudes and the erosion of deference afforded to the medical profession, the House of Lords examined the central issue of Bolam in Bolitho v City Hackney Health Authority ⁸ and chose to look at the question of whether it is the courts or the medical profession which exercised supreme authority over what amounted to the standard of care demanded of clinicians. In that case their lordships ruled that the medical profession would only escape liability for their actions if the expert witness testimony of peers on which they sought to rely was found by the court to be logical and reasonable. Although the judgement affirmed that the final say was with the courts Lord Browne-Wilkinson somewhat mitigated its force when he stated that it would be rare that the courts would find a competent medical expert to be unreasonable. ⁹

Notwithstanding forecasts for its scarce application Bolitho does allow for the judicial scrutiny of expert evidence rather than mere endorsement and gives the courts authority to prefer the testimony of one body of experts over another. In an examination of case law post Bolitho, McClean ¹⁰ found that the case was sparingly referred to and that the courts still appeared to be more inclined to follow the standard form of Bolam without utilising Bolitho permitted analyses of professional opinion. Mulheron¹¹ however concluded that that Bolitho’s influence could be seen despite the fact that it was not often openly acknowledged. It is worth noting that the logic of expert medical evidence has been directly examined in some cases that have led to findings of negligence where they would previously have been afforded a harbour of sanctuary under Bolam. In Reynolds v North Tyneside Health Authority¹² the court followed Bolitho and held that expert testimony that supported a practice that was untenable lacked a logical basis and accordingly could not be defended.

In Penney v East Kent Health Authority¹³ a case that concerned false negative cervical screen results, the courts ruled on the basis of what the actions of the screener should have been when exercising reasonable care and rejected the defendants’ expert testimony that the slides could have been reported as negative- on the basis that it was inconsistent with public confidence and illogical.

Considerations of public policy have previously played a part in judicial unwillingness to set a more prescriptive standard for doctors out of fears that it will result in overly defensive medicine in that clinicians will avoid getting involved with more pioneering and radical treatments due to fears of litigation. The Medical Innovation Bill championed by Lord Saatchi and currently in the consultation stage seeks to replace the Bolam test on the basis that it actually creates an unnecessary restriction on doctors by preventing them from deviating from normal practice in order to explore and develop new innovative techniques and surgical procedures¹⁴. The Bill which claims to prioritise the best interests of the patient proposes legislation permitting the medical profession to retreat from accepted medical practices in particular circumstances which include the existence of a plausible reason, an assessment of the risks associated with the proposed treatment and a full multi-disciplinary discussion.

The Bill has received a great deal of criticism from the medical profession itself who feel that it is unnecessary and fear that it will compromise patient safety and “encourage quackery”¹⁵. The chairman of the British Medical Association, Dr Mark Porter commented, “At present, the law on medical negligence is framed to deter clinical interventions that might harm patients out of proportion to the potential benefits. The BMA is not aware of any evidence that shows this has stopped innovative and potentially successful treatments being trialled”¹⁶. Whilst medical advances must not be stifled the aims of law surrounding medical negligence litigation must do more than cover the back of the doctor. It is difficult to see how Bolam can be criticised for curtailing medical progress when its test is met merely on the basis of peer support. As argued by Dr Gerard Panting, “Fear of litigation has been cited as the driving force behind defensive medicine. But would that be so bad? If it causes one clinician to seek that views of a second……I, as a patient, am all for that”¹⁷.

The question of determining whether standards of care have been sufficiently reached by members of the medical profession in clinical negligence cases will always be a formidable one for the courts given the undeniably complex and highly technical issues often in question. In an arena where developments are ever evolving and fast paced and concern practices that sometimes defy reliable determinants and cannot always be explained with complete scientific accuracy the answers to legal questions examining the adequacy of levels of care will inevitably heavily depend upon the views of the medical fraternity itself. In such circumstances it is difficult to imagine a fair and just system of medical litigation which does not apply a Bolam type test which accordingly makes it difficult to eliminate. Legislation that provides greater liberty for the medical environment to play God with unregulated experimentation which would unavoidably compromise patient safety seems a backward step and a return to patternalism which is unjustified. Notwithstanding an acknowledgement and sympathy for the complicated and highly specialised topics often faced by the courts in medical litigation Bolam must not be used to allow judges to abdicate responsibility for ensuring that proper standards of care are being followed. If forcefully applied and fully embraced Bolitho represents an opportunity for the courts to apply a healthy check and balance to the vulnerabilities of Bolam and to ensure that it is not used to legitimise and maintain unsound, antiquated or shoddy practices of patient treatment simply on the basis that it is supported by fellow practitioners.

Bibliography

Alghrani A, Bennett R, Ost S, “The Impact of the Loss of Deference towards the Medical Profession” – Bioethics, Medicine and the Criminal Law Volume I (Cambridge University Press 2012)

BMA News “Medical innovation bill allows ‘reckless practice” (15^th May 2014) accessed 1 ^st June 2014

Carr C, Unlocking Medical Law and Ethics (Routledge 2012)

Crossley J, “BMA takes scalpel to Saatchi Bill” (Zenith PI 27^th May 2014) accessed 1st June 2014

Dixon-Woods M, Yeung K, Bosk C, “Why is UK medicine no longer a Self regulating profession? The role of scandal involving “bad apple” doctors” Social Science and Medicine xxx (2011) 1-8

Harpwood V, Medicine, Malpractice and Misapprehensions (Routledge Cavendish 2007)

Lord Woolf “Are the Courts excessively deferential to the medical profession?” (2001) 9 Medical Law Review 1

McCartney M, “Withdraw Saatchi’s quackery bill” British Medical Journal 29^th April 2014

McClean A, “Beyond Bolam and Bolitho” 2002 5 Med L International 205

Mulheron R, (2010) “Trumping Bolam : A Critical Legal Analysis of Bolitho’s Gloss.” Cambridge Law Journal 69, 609-638

Panting G, “Doctors on the defensive” The Guardian (1^st April 2005)

Saatchi M, “We must liberate doctors to innovate.” The Telegraph 26^th January 2013

Stone C, “From Bolam to Bolitho : unravelling medical protectionism” Medical and Legal Limited < http://www.medicalandlegal.co.uk> accessed 27^th May 2014

2013

Table of cases

Bolam v Friern Hospital Management Committee[1957] 2 All ER 118

Bolitho v City and Hackney Health Authority

Hatcher v Black The Times 2^nd July 1954[1997] 4 All ER 771

Maynard v West Midlands Regional Health Authority [1985] 1 All ER 635

Penney v East Kent Health Authority [2000] 55 BMLR 63

Reynolds v North Tyneside Health Authority [2002] Lloyds Rep Med

Sidaway v Bethlem Royal Hospital Governors [1985] AC 871

Whitehouse v Jordan [1981] 1 All ER 267

This work was produced by one of our professional writers as a learning aid to help you with your studies

Consider whether it is time that the Supreme Court declared there to be a tort of invasion of privacy, or whether an individual’s right to privacy is already adequately protected.

Date authored: 7 ^th July, 2014

“We have reached a point at which it can be said with confidence that the law recognises and will appropriately protect a right of personal privacy.”

Sedley LJ in Douglas v Hello! Ltd. (No.1) [2001] 2 WLR 992.

“I do not understand Sedley LJ to have been advocating the creation of a high-level principle of invasion of privacy. His observations are in my opinion no more than a plea for the extension…of…breach of confidence…There [is] a great difference between identifying privacy as a value which underlies the existence of a rule of law (and may point the direction in which the law should develop) and privacy as a principle of law in itself.”

Lord Hoffman in Wainwright v Home Office [2003] 3 WLR 1137.

Before examining how it is regarded and analysed in a legal context, it is useful to ask what the definition of privacy is. That is, what does the concept mean to us on an everyday basis. The Oxford dictionary provides two definitions of ‘privacy’: (1) “ A state in which one is not observed or disturbed by other people” and (2) “The state of being free from public attention ”. When we consider each of these definitions carefully we can understand how, on an everyday basis, a life without any privacy would seem to be inconceivable. Maintaining the privacy of our inner lives allows space for psychological well-being and maturation, for creativity and for the development of intimate and trusting relationships with others. Some have argued that the reason Marilyn Monroe, one of the world’s most famous actresses, committed suicide was because her life was entirely public and exposed. Indeed, this may be argued for many tragic cases of suicide among celebrities or public figures. Our relationship with, and concept of, privacy is changing however.

Privacy is a hot topic today, both in the legal system and in society in general, because of the massive changes in the way we live over the past two decades. It is more and more difficult to be in a state where one is not observed or disturbed by others or where one is free from public attention, because of the widespread intrusion of, for example, mobile phones and smart phones, cameras, videos, CCTV surveillance, GPS, Google Earth and internet cookies (even if we are innocently browsing the internet at home alone, our movements are likely being tracked, monitored and stored). Arguably, one has to go on a technology-free retreat in the wilderness to be guaranteed this state. Interestingly, on the other hand, this increased exposure of our lives to public attention has blurred the lines between what we consider private and public. Many of us willingly share private and intimate information publicly through social media like Facebook, Twitter, Youtube and Blogs so much so that Facebook CEO, Mark Zuckerburg has said privacy is no longer the “social norm” and “ People have really gotten comfortable not only sharing more information and different kinds, but more openly and with more people”. It is true that our levels of comfort with living our lives more and more publicly have changed. In particular, the younger generation today cannot imagine a world without internet, smart phones, Facebook and Twitter while the older generation are struggling to adapt to life with these additions.

The idea of privacy as a legally protected right in fact originated in the US well over a century ago when an article entitled ‘The Right to Privacy’ was published in the influential Harvard Law Review by two attorneys, Samuel D Warren and Louis D Brandeis. The article achieved legendary status and led to the birth of the legal recognition of privacy in the US in the early part of the 20th century. Notably, and arguably far more relevant today than at the time it was published, the article referred to “the intensity and complexity of life” and argued that invasions of privacy subjected a person to “mental pain and distress, far greater than could be inflicted by mere bodily injury” and that people needed to be protected. Today, unlike in the UK, modern tort law in the US offers comprehensive protection in the form of four categories for invasion of privacy. They are: (a) intrusion upon the plaintiff’s seclusion or solitude or private affairs; (b) public disclosure of embarrassing private facts about the plaintiff; (c) publicity which places the plaintiff in a false light in the public eye; and (d) appropriation, for the defendant’s advantage, of the plaintiff’s name or likeness.

Despite these developments in the US, privacy as a legally protected right was far slower to develop in the UK. It was finally recognised when the European Convention on Human Rights (ECHR) was implemented into UK law by way of the Human Rights Act 1998 (UK). Article 8 of the ECHR explicitly provides a right to respect for one’s “private and family life, his home and his correspondence” subject to certain restrictions. This leads to the consideration, having regard to this significant development in 1998 in the UK, of whether an individual’s right to privacy today is adequately protected by the law. In my view, there is adequate protection available today. A rapid evolution of the law of privacy in the UK has happened since 1998 with the Courts finding themselves obliged to give appropriate consideration and effect to Article 8 in the cases that come before them. A review of the significant case law is developed further below. However, it is worth first mentioning that there are numerous other laws which protect aspects of life in which invasions of privacy can occur. By way of example, privacy on your land and in your own home is protected through the cause of action of private nuisance; privacy of your personal space and bodily integrity is protected through the criminal action of battery and perhaps to a great extent by the Protection from Harassment Act 1997; the right to have your personal and professional reputation maintained is protected by the tort of defamation; and finally data protection legislation offers considerable protection for our private information and data when shared.

Most importantly, as referred to above, the Courts have been developing and expanding the law of privacy (without going as far as declaring a tort of invasion of privacy) through the equitable law of breach of confidence to encompass misuses of private information. It has recently been acknowledged by the Court in Judith Vidal-Hall & ors v Google Inc [2014] EWHC 13 that there is now an independent tort for misuse of private information. It is worth examining a selection of the most important cases chronologically to consider how the issue has been discussed and dealt with:

Douglas v Hello! Ltd [2001] QB 967, involved the unauthorised and surreptitious taking, and selling to Hello! magazine, of wedding photographs of the celebrity wedding of Michael Douglas and Catherine Zeta-Jones by a freelance photographer. While the Court made the important acknowledgement in that case that “ We have reached a point at which it can be said with confidence that the law recognises and will appropriately protect a right of personal privacy ” ultimately it was held that the claim could be dealt with under the equitable law of breach of confidence.

Campbell v Mirror Group Newspapers Ltd [2004] UKHL 22, involved well-known celebrity model Naomi Campbell suing Mirror Group Newspapers for breach of confidence over published photographs of her leaving a Narcotics Anonymous meeting. In that case it was stated that the cause of action for breach of confidence ” has now firmly shaken off the limiting constraint of the need for an initial confidential relationship” and that it should more appropriately be referred to as a cause of action for ‘misuse of private information’ since the law now imposes a “duty of confidence” whenever a person receives information he knows or ought to know is fairly and reasonably to be regarded as ‘confidential’ or, what is more appropriately termed ‘private’.

Wainwright v Home Office [2004] 2 AC 406 involved a strip search of the plaintiffs who had gone to visit a relative in prison. The search had been conducted in accordance with the prison rules and was carried out in a manner which was calculated, in an objective sense, to humiliate and cause distress to the plaintiffs. Lord Hoffman emphatically confirmed that there was no common law tort of invasion of privacy and that the general opinion of the judiciary was that legislating in the area of privacy was a matter for Parliament rather than ‘the broad brush of common law principle’.

ETK v News Group Newspapers Ltd [2011] EWCA Civ 439 involved an application for an injunction to stop the publishers of the News of the World Newspaper publishing, communicating or disclosing to any other person information relating to the identity of ETK or details of the sexual relationship between ETK and ‘X’, a person named a confidential schedule to the application. This case is useful as the Court summarised the steps which govern an application for an interim injunction to restrain publicity of private information. They are:

(a) First step: whether the applicant has a reasonable expectation of privacy so as to engage Article 8 of the ECHR. If this criteria is not present the application will automatically fail. A decision as to whether a reasonable expectation of privacy exists will take all of the circumstances into account and generally uses a test of whether a reasonable person of ordinary sensibilities, if placed in the same situation as the subject of the disclosure, would find the disclosure offensive. Protection may be lost if the information is already in the public domain;

(b) Second step: this step involves a balancing exercise with the right of freedom of expression in Article 10 of the ECHR. The decisive factor is the contribution which the information the subject of the disclosure makes to a debate of general interest.

In conclusion, an acknowledgement that the law of privacy in the UK is adequate today equally acknowledges the fact that the common law is constantly in a state of flux and evolution. As our society changes, and our concepts of privacy change, so to must the Courts be prepared to deal creatively with the cases of invasion of privacy that come before them as, I would argue, they have done to date by expanding upon breach of confidence law and developing the tort of misuse of private information. When one considers the definition of privacy one starts to appreciate the difficulties encountered by both the legislature and the judiciary, and their reluctance, in attempting to construct uniform laws, regulations and rules around that definition. As Chief Justice Gleeson noted in the Australian case of ABC v Lenah Game Meats Pty Ltd (2001) 208 CLR 199 “ the lack of precision of the concept of privacy is a reason for caution in declaring a new tort of the kind for which the respondent contends .” Some have argued that privacy itself is beyond the scope of the law because it is a natural human right in the same way as freedom is. Furthermore, like freedom, privacy can mean different things to different people depending, for example, on their upbringing, age group, gender, culture, global location, education or faith. Accordingly, the extent to which privacy may be seen to be invaded or intruded upon will depend on the individual and his or her relationship with society. Finally, I would venture to say that Mark Zuckerburg of Facebook may in the near future be proved right. As technology and interconnectivity continue to explode and expand privacy may eventually no longer be considered a social norm.

Bibliography

Books

– Privacy and Media Freedom, Raymond Wacks

– Defamation Law in Australia, Chapter 18 – Privacy, Patrick George

This work was produced by one of our professional writers as a learning aid to help you with your studies

1. The selection of an alternative dispute resolution mechanism is particularly pertinent in international trade cases because the parties are, by definition, domiciled in different nation states (Chuah, 2009). Since an agreement must therefore be reached on choice of law issues, it is common for parties to consider stepping outside standard litigation processes altogether and instead stipulating for arbitration to take place (Neipert, 2002).

Arbitration offers several advantages over litigation. Typically, it is less expensive than litigation, since fewer legal professionals are required. It is also perceived to lead to a speedier resolution of disputes due to decreased formality, the removal of the need to schedule around the timetable of the formal court system, and, typically, the absence of a right of appeal (Schmitthoff, 2007). Arbitration allows the parties to control a number of variables in the dispute resolution process through prior agreement (Mustill & Boyd, 2008). These include the choice of an arbitrator with specialist knowledge of the relevant area, the scope of the arbitration, the location of arbitration and the choice of law. In addition, arbitration is a private rather than public procedure and therefore will not be subject to public record: this is likely to be advantageous if the subject matter is particularly damaging to public image of company. By contrast, many of these same factors may prove disadvantageous to the parties in a different factual scenario. The lack of a right to appeal may become a disadvantage if the arbitrator makes an error of fact, or the arbitrator appointed is not as impartial as the parties would wish. In addition, arbitration is disadvantageous because it lacks formal mechanisms for the enforcement of arbitral awards or attendance at the arbitration, and cannot compel third parties to attend.

Litigation offers potential advantages over arbitration. It is, in principle, totally impartial as to the outcome of the case. It determines cases according to a fixed substantive law without reference to the general principles of fairness that an arbitrator might refer to (Moses, 2008). It also provides for an appeal procedure, should that be perceived as an advantage. In addition, there are fewer variables for the parties to control or anticipate in advance of the dispute arising, and litigation is supported by formal enforcement mechanisms, including contempt of court and proprietary remedies. By contrast, judges may not be specialists in the given dispute area, which my be deemed more important than their appearance of impartiality to the litigation process. Formal litigation is associated with delays, inflexible timetabling and higher costs, although it should be noted that the costs of any given dispute resolution mechanism are dependent on the facts of the case (particularly its complexity, length and the number of legal professionals employed).

It is also important to discuss the possible limitations that domestic laws may place on the nature of the arbitration, and the effect, therefore, that they may have to tip the balance in favour of one method over the other in any given situation. There are significant theoretical difficulties in determining the source and content of the arbitrator’s power: the form and nature of arbitration may be limited by the way in which law governing the contractual relationship between the relevant parties conceives of arbitration (Lew, 1978). Most legal systems adopt the position either that the arbitration agreement constitutes an “autonomous source of authority wholly independent of any national legal system” (Goode, 2004: 1178) or, alternatively, that the arbitration agreement “brings into play an autonomous arbitral order derived from the institutional character of arbitration and based on principles common to civilized states” (Mustill and Boyd, 2008: 66). There is, therefore, a conflict between the autonomous nature of the arbitration and its reliance on the law of the forum in order to confer this autonomy. This conflict may place a practical limitation on the form that the arbitration takes if the lex fori arbitrae does not permit the parties to consent out of particular legal mechanisms (Goode, 2006). Despite the intentions of the parties to contract out of it, litigation may be the only available mechanism.

2. To what extent has harmonization of legal rules in international trade taken place?

International trade is a legally complex field due to the disparate bodies of national commercial law that may apply to any given transaction (Sealy & Hooley, 2008). There is widespread recognition that international commercial codes are necessary to avoid the difficulties inherent in conducting international commercial transactions using the laws of individual nation states (Goode, 1991) and, as a result, significant efforts have been made to generate substantive legal codes that parties can incorporate by reference to govern their international trade transactions. Several specific codes should be referenced to outline the near-comprehensive scope of the fields in which harmonization has taken place: the Vienna Convention on Sale of Goods and standard form terms such as the Cartegen Incoterms govern international sale of goods, the UNCITRAL Model Law on International Commercial Arbitration governs alternative dispute resolution mechanisms in the international context, the Uniform Customs and Practice for Documentary Credits governs the payment mechanisms typically used in international trade. Further to these attempts at harmonization, Bonell (2003) has proposed that a global commercial code is developed that has an application to all members of the international trade community.

However, an equally significant movement has been underway which intends to secure harmonization of procedure in international trade (Goode, 2006). It is often overlooked that the substantive regulation of international trade takes place in a framework outside that of the national courts, and the harmonization of the procedures of dispute resolution is arguably as important as that of the substantive rules of international trade (Stephan, 1999). In this respect, the efforts of the European Union in harmonizing the conflicts of laws rules under the Brussels I Regulation and the Rome II Convention are particularly notable (Briggs, 2008).

What reforms are necessary to improve the legal position of international traders?

Stephan (1999) takes this observation to its logical conclusion, and argues that the legal profession should stop trying to unify substantive rules of trade law until a comprehensive framework has been developed for the dispute resolution mechanisms in which those rules will apply. Parry argues that inherent limitations arise when uniform international trade rules are implemented in different national legal systems. He assesses the benefits of further harmonization under three headings: the reduction of legal risks in international commerce, legal reform, and enhanced roles of international legal advisers. His argument is that harmonization operates in favour of one of those interests at any given time, but is likely to work against the other. Personally, I would seek to make the broader argument that further reform in the field of substantive harmonization is likely to suppress discussion of procedural harmonization. To my eyes, the most important reforms for the harmonization of the international trade system at present include a more uniform approach to dispute resolution, and an extension of a conflict of laws system such as the rules in place within the EU Member States, to members of the international trade community more broadly.

3. Produits SA v Products PLC

The question of which courts have jurisdiction to hear the dispute will be determined by the Brussels I Regulation. The Regulation applies to all civil and commercial matters (Art 1(1)) and this dispute is likely to fall squarely within that definition as a contractual dispute between two incorporated bodies. Art 5(1) states that in relation to contractual disputes, the court of the Member State in which the characteristic performance of the contract takes place shall have jurisdiction. The characteristic performance is “the performance for which payment is made by the counterparty” (Briggs, 2008: 171), and will therefore be the place where the goods are due to be delivered by the seller. Since the contract stipulates that the goods are to be provided FOB Southampton, then the place of performance is England. The English courts therefore have jurisdiction to hear the claim.

The applicable law will be determined by the provisions of Rome I. In the absence of a choice of law by the parties, Art 4(2) states that in contractual disputes where the contract is entered into in the course of a trade or profession, then the country in which the principal place of business is situated shall be the company or performance is to be made is the country whose law governs the contract. On the facts, it would appear that English law therefore governs: Products PLC is an English registered company, and the place of performance of the characteristic performance was England. For the avoidance of doubt, the contract between Products PLC and Produits SA was a contract for sale rather than carriage of goods, and therefore Art 4(4) does not apply.

Products PLC v Nee Soon Wat Pty

The question of jurisdiction in this case will depend on whether the claimants can argue that the office held by the defendant company in Rotterdam constitutes residence within a Member State of the European Union for the purposes of the Brussels Regulation. Art 59 states that in order to determine whether a party is domiciled in the Member States whose courts are seized of a matter, the court shall apply its internal law. Following Fawcett & Carruthers (2008), in order for a company to be resident in a particular country it must be demonstrated that the company has a fixed place of business from which it has carried out business for more than a minimal time and that the company’s business is transacted from that place. It is a matter of factual interpretation whether the defendant company carries out business in The Netherlands and has done for a significant period of time, but prima facie the existence of an office is likely to suffice. We may therefore apply the Brussels Regulation as above, although the characteristic performance here is effected by shipment CIF to Bangkok. Since this is not within a Member State, Art 5(1)(b) cannot apply, and Art 5(1)(c) directs us back to the general rules in Art 5(1)(a) that the courts of the place of performance will have jurisdiction. The claimants here would be able to make a strong argument on the basis of payment in sterling to a London bank account, combined with delivery CIF from a London port, that the relevant performance in this contract was due to be effected in England.

The applicable law will then be determined by Rome I, under Art 4(2) as above. Since the claimants are selling the tyres in the course of their trade or profession, then the choice of law is the country in which they have their principal place of business. Here, there is little doubt that since Products PLC are an English registered company, their principal place of business will be found to be England. English law is therefore likely to apply.

4. Distribution

Distribution is a highly simplistic method of overseas marketing. The legal structure of the distribution agreement is an international sale agreement: the international seller purchases the relevant goods from the domestic seller, and then sells the goods to third party buyers overseas for his own account (Goode, 2006). Within the distribution contract, no further legal obligations need necessarily be entered into between the parties except those contained in the contract of sale. The sale will typically be governed by standard commercial terms such as Vienna Convention on Sale of Goods 1980 (August et al, 2008).

The distribution method has several advantages. Most important is the simplicity and familiarity of the international sale agreement between the seller and the distributor: the method involves only a straightforward contract of sale for goods, governed by standard international terms. Under a distribution method, the domestic seller is not exposed to liability in the international market because the profit is made at the point of initial sale. In addition, no additional costs associated with selling in the overseas market are incurred to the domestic seller, since the international seller assumes any overheads (Neipert, 2002). There are, however, several disadvantages. Within a distribution agreement, the domestic seller has no further legal relationship with the international seller once the sale has been completed, and must therefore surrender all control over the goods and the manner in which they are sold. This can render it much more difficult to maintain a brand presence in the overseas market, since the domestic seller (who is also likely to be the producer of the goods) cannot control the manner and form in which the goods are sold without entering into further agreement (Goode, 2006). In addition, any revenue from the overseas sale is limited to the amount made in the initial sale to the distributor, who then sells for his own account in the overseas market: the domestic seller will not, within a distribution agreement, have recourse to any additional profit made at the point of sale to overseas consumers.

Franchising

The simplicity of the distribution method can be contrasted with the franchise. Franchising does not rely on a legal structure per se, but rather a specific business model in which the domestic seller grants a licence to the international seller which permits the latter to provide a good or service in the overseas market that is subject to a trade mark by the domestic seller (Benjamin, 2008). The franchisee will then sell the goods for his own account, and payment mechanisms between the overseas seller and the domestic seller will be referred to the units sold or the profit generated. By contrast to the distribution agreement, the franchise method allows the domestic seller to impose significant restrictions on the way in which the product is sold: these restrictions are intended to bolster sales by providing coherent to the franchise system, as well as implementing successful business practices (Goode, 2006). From the perspective of the domestic seller (‘the franchisor’), it has the advantages that it is a highly specialist marketing form that simultaneously allows the domestic seller to exercise a high degree of control over the franchisee without exposing himself to liability in the international market, since the domestic seller is not financially liable to the franchisee or creditors of the franchisee. From the perspective of the overseas seller (‘the franchisor’), the franchise method would present a significant disadvantage to a seller wishing to develop an independent sales method or brand presence in the overseas market, but would offer significant advantages in terms of business management support and branding.

The method that is preferred will depend on the likely balance that the parties seek between three factors: commercial convenience, ease of entering into specific legal relationship, and desire to enter into contractual relationship with overseas party (Schmittoff, 2007). One must also consider the international tax implications of the transaction (Goode, 2006) which although well outside scope of this analysis, may be determinative.

5. Structure

For the legal implications of the letter of credit to be explained, one must first have an understanding of its structure. A letter of credit consists of a number of contractual relationships between the parties that seek to provide an autonomous system of payment for a documentary sale (Wood, 2007). The credit is comprised of five contracts between the four relevant parties: the underlying contract between the buyer and the seller; the contract between the buyer and the issuing bank which instructs the latter to open the letter of credit, on terms that specify that payment is not to be made until the relevant documents are received; the issuing bank will enter into a contract with the advising bank notifying them of the existence of the credit and authorizing them to make payment to the seller when the relevant documents have been received; the issuing bank will also enter into a contract with the seller stipulating that payment will be made against documents; finally, the advising bank enters into a contract with the seller stating that payment will be made against documents when provided to the advising bank (Goode, 2006). Each of these contracts will typically be governed by the Uniform Customs and Practice for Documentary Credits (UCP), provided that it is expressly incorporated by reference into the contracts comprising the credit as required under both English law and Art 1 UCP itself.

Autonomy

The important result of the multiple contracts involved in the letter of credit is that it becomes a payment mechanism where payment is made autonomously from the underlying contract of sale (Sealy & Hooley, 2008). As a leading commentator has stated, one of the “primary functions of the letter of credit is to create an abstract payment obligation independent of an detached from the underlying contract of sale between the seller and the buyer and from the separate contract between the buyer and the issuing bank” (Goode, 2006: 971). The legal implication of the autonomy of each contract within the letter of credit is that the seller will receive payment against the documents regardless of the his performance of the contract of sale with respect to the goods. An exception to the autonomy principle is made in cases of proven fraud, and in that respect the letter of credit is analogous to a bill of exchange in terms of its security of payment (Benjamin, 2008).

Enforceability

The principle of autonomy of the contracts comprising the letter of credit is supplemented by the principle of enforceability: payment must be made against documents that have been correctly tendered to the advising bank under the terms of the contract between those two parties (Wood, 2007). There must be strict compliance with the terms of the letter of credit and small discrepancies between the documents and the terms of the letter of credit will prevent payment being made (J H Rayner v Hambros Bank, 1943).

The paramount advantage of the letter of credit is that it provides certainty and security in payments made in international trade transactions, where other mechanisms may fail to ensure that the seller is paid in a timely fashion once title to the goods has been received (typically in the form of a bill of lading or similar document of title) (Sealy & Hooley, 2008). The letter of credit has the potential to give rise to legal oddities into two situations, either where payment will be made against documents even in situation where parties know that goods have not been tendered under the contract, or in case where goods have been tendered but payment cannot be made against the documents because of an otherwise insignificant difference between the wording of the documents and the terms of the letter of credit.

6. This problem will seek to briefly advise Westminster PLC (‘Westminster’) in relation to each potential claim that they have against the Ron under the contract of sale.

The most significant claim that Westminster has is in respect of the boxes of rum that have fallen from the crane into hold and onto quayside during loading. Under the terms of the Cartogen Incoterms 2000, the seller in an FOB contract is under a duty to load the goods onto the ship. Despite the significant criticism of the rule in Pyrene v Scindia (1954), the goods are deemed to have been loaded at the point at which they cross the ship’s rail (Benjamin, 2008) and as a result, the party that bears the risk of the damage to the broken bottles of rum will depend on which side of the ship’s rail the goods were above in the moment before they fell from the crane. It is likely that Westminster will bear the risk of all the boxes that fell into the hold, as their location would imply that the goods had passed the ship’s rail before they fell. Westminster would, however, have a claim against Ron in respect of the boxes that fell into the quayside, since it is unlikely that they had passed the ship’s rail before falling. The claim would be governed by Arts 46-50 Vienna Convention on Sales.

A second claim can be made in respect of the failure of the master of the vessel to take more than half the shipment. Under the terms of the Cartegen Incoterms 2000, the seller in an FOB contract is under a duty to load the goods, and is therefore liable for breach of that obligation in nominating a ship that refuses to load the full cargo. Westminster’s remedies for breach are governed by the Vienna Convention on Sales1980, in particular Art 51(1) which states that the buyer may make use of the remedies listed in Arts 46 – 50 in the event that the seller delivers on a part of the goods or if only a part of the goods delivered is in conformity with the contract. Both of these criteria apply on these facts.

A third claim can be made in respect of the inadequate screw tops provided by Ron and the subsequent damage suffered to the bottles. Westminster will have a claim against Ron under the contract of sale for the provision of faulty goods. Art 35(1) Vienna Convention on Sales places Ron under an obligation to deliver goods which are “contained or packaged in the manner required by the contract” and further states in Art 35(2)(d) that goods will not be deemed in conformity with the contract unless they “are contained or packaged in the manner usual for such goods or, where there is no such manner, in a manner adequate to preserve and protect the goods”. There is no indication that Westminster was aware of the inadequate packaging and Ron could not therefore raise a defence to the claim under Art 35(3), which states that the seller will not incur liability where the buyer was aware of the defect.

A fourth claim can be made in respect of the bottles that have broken due to inadequate packing for the voyage. Under the Cartogen Incoterms 2000, it is the duty of the seller in an FOB contract to provide export packing. Westminster therefore has a valid claim against Ron for the value of the damage that was suffered due to inadequate packaging.

As a final point, it is clear that Westminster does not have a claim against Ron in respect of the delay in loading. The delay is contractually insignificant because the goods were shipped on 18th September, which is still within contract terms (“September shipment”).

In respect of the claim that has been made against Westminster for storage fees payable to the Colombian authorities, my advice would be to resist payment and direct the Colombian authorities to Ron. Under the terms of the Cartogen Incoterms 2000, the seller in an FOB contract is under a duty to pay any storage fees incurred.

Bibliography

Vienna Convention on Sales

Uniform Customs and Practice for Documentary Credits

UNCITRAL Model Law on International Commercial Arbitration,

Cartegen Incoterms

Brussels I Regulation

Rome I Convention

August, R. A., Mayer, D., Bixby, M., 2008. International Business Law: Text, Cases and Readings. 5th ed. London: Pearson Education

Chuah, J., 2009. Law of International Trade. 4th ed. London: Sweet & Maxwell

Briggs, A., 2008. The Conflict of Laws. Oxford: Oxford University Press

Goode, R., 2006. Commercial Law. 3rd ed. London: Penguin

Guest, C. J., Miller, C. J., Harris, D., Treitel, G. H., Lomnicka, E., Sealy, L. S., Reynolds, M. B., 2008. Benjamin’s Sale of Goods. 11th ed. London: Sweet & Maxwell

Lew, J. D. M., 1978. Applicable Law in International Commercial Arbitration. Leiden: Sijthoff & Noordhoff

Mustill, M. & Boyd, S. C., 2008. Commercial Arbitration. 3rd ed. London: Butterworths

Stephan, P. B., 1999. The Futility of Unification and Harmonization in International Commercial Law. University of Virginia Law School Legal Studies Working Papers Series accessible at http://papers.ssrn.com/paper.taf?abstract_id=169209

Goode, R., 1991. Reflections on the Harmonisation of Commercial Law. Uniform Law Review, 54

Neipert, D. M., 2001. Law of Global Commerce: A Tour. London: Prentice Hall

Moses, M. L., 2008. The Principles and Practice of International Commercial Arbitration. Cambridge: Cambridge University Press

Murray, D., Holloway, C., Timpson-Hunt, D., 2007. Schmitthoff’s Export Trade: The Law and Practice of International Trade. 11th ed. London: Sweet & Maxwell

Sealy, L. S., Hooley, R. J., 2008. Commercial Law: Text, Cases and Materials. 11th ed. Oxford: Oxford University Press

Wood, P., 2007. Law and Practice of International Finance. London: Sweet & Maxweel

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This essay will consider the topic of how adequately intellectual property rights protect the position of the creator, with whom those rights may reside.

The essay will deal with four specific areas of this topic –

(i) intellectual property patents;

(ii) copyright;

(iii) trade marks and

(iv) industrial design law.

The essay will deal with the nature of intellectual property rights, their scope and efficacy.

Intellectual property rights, and their various forms

These rights accrue where something is created, such as where a scientist invents a machine that performs a certain function. Intellectual rights are legal rights, and they give the creator a right to ensure that a creation is not reproduced, without the authorisation of the creator. The intellectual property right therefore protects the creation, since the creation can, and usually is a saleable commodity. By extension the rights of the creator are also protected, because the creator may enforce these legal rights against any third party who attempts to reproduce their creation without authorisation. Thus a creation attracts a range of legal protections that a creator can enforce, thereby protecting the profitability of the creation. Intellectual property rights can be transferred, as the right of protection is tied to the creation, more than it is to the creator, and this frequently occurs, for example in relation to the intellectual property rights in drugs that are owned originally by a given scientist, but transferred to the company that may employ the scientist, and fund their research.

Intellectual property rights are protected depending on the nature of the item that is to be protected, and these protections can take specific forms such copyrights, or patents depending on the actual nature, properties and characteristics of what is to be protected.

A patent offers protection regarding the intellectual property rights in a new invention. Patent protection is more directed at the process through which a creation is created . It focuses on the process itself, thereby protecting how a creation is created. There are certain criteria that apply to distinguish a patent as opposed to another form of intellectual property protection. These are: the invention must be new, and contain an innovative step that is original. There must be scope for the creation to be used within industry. In order to be patentable, the creation must not be a scientific, or mathematical discovery, theory or method, a literary work or some form of performance, a way of presenting information or of doing business or performing, a variety of animal or plant, a diagnostic technique or medical treatment. Furthermore a patent must not offend public policy or morality.

A patent, therefore is where intellectual property rights accrue within a certain set of parameters, such as where a timescale applies. An example of this is the intellectual property rights that accrue to drugs manufacturers – these are protected by patents, and international law provides that these last for a given length of time, which in turn enables third parties to reproduce the drug after the patent has expired. A patent must almost always be applied for, with the authorisation of the creator.

Copyright protects particular types of works. Usually this is works that have an author, such as a book, article of some type of performance, such as a musical or other artistic performance. The Copyright, Designs and Patents Act 1988 gives automatic protection to the work of such a creator. In the UK the main source of legislation that protects the position of the creator is the Copyright, Designs and Patents Act 1988.

The rights of creators under the various types of intellectual property rights

In regards to copyright, there is no need to apply for a “patent” , although it must be borne in mind that particular exemptions apply. The operation of these exemptions offer some level of accessibility to third parties, who can reproduce the work for a particular, defined purpose without infringing the legal copyright of the creator.

An example is where a book, protected by copyright is borrowed from the library by a student, and the student photocopies the contents of it for study purposes. The student is authorised under statute to do this, as long as the photocopy is used for this particular purpose. Likewise a tutor may use a book in the same manner. This exception is known as the “fair-dealing” exception.

The protections available to copyright holders are premised on defaulted assumptions that operate automatically. This gives the creator a specific and in many senses, quite a clearcut level of protection where their copyright may have been infringed. The exemptions, while they appear to quite wide-ranging are nevertheless limited to very specific types of non-commercial situations, and due to this, it would be difficult for the exemptions to be abused in order for the intellectual property rights of the copyright holder to be infringed.

The copyright, as far as this protects the position of the creator is therefore quite an effective construction. It may be seen as cost-effective as a copyright holder does not have to incur any expense prior to any potential infringement of their copyright. The rights of the copyright holder may therefore be seen as quite effectively protected under the law of England and Wales.

The situation of the intellectual patent holder is different, for a number of reasons, and the case for how well the creator is protected under the system is not quite as clearcut.

By contrast with the situation in respect of copyright holders, the intellectual property patent is a source of protection that must be applied for, and granted. Patent rules thereby impose an obligation on the creator to acquire protection, and to prove that the creation in question is worthy of such protection. In this sense the copyright protection accrues on a defaulted basis, whereas the patent is a different mechanism that must be activated, before it creates an enforceable right of intellectual property right protection. However, the automatic nature of the protection that is created by a copyright has the drawback that rights are qualified by statutory rules, and this is something that the intellectual property patent is not as susceptible to.

The situation of the patent-holder creator is therefore affected by complex factors including the nature, and means through which intellectual property rights may be invoked and the manner is which they are created in the first place.

The most starkly relevant point is the level of obligation placed upon the would-be patent holder who is the creator of an invention. This burden imposes a high level of expense on the part of the creator, and due to the availability of the mechanism, the recourse that may be affected by creators that fail to use it are quite limited. Furthermore, the creation of a patent does not offer a full level of protection to the patent holder, since any allegations that the patent has been infringed are subject to the burden of proof in legal proceedings and proving an infringement is yet another potential complex and expensive engagement with legal processes.

On the other hand however, the obligation placed upon the patent holder requires the creator (or the third party to whom a creator may have passed their intellectual property rights to) to define their creation, and explain its purpose clearly, within documents that are recorded and held by third parties. This process may arguably safeguard the position of the patent holder since the prior description may be helpful in terms of proving any future potential infringements.

The complex nature of the patent can also confer rights on the creator of a patent, where that creator has assigned the rights of the creation patented, to a third party such as an employer. This is a situation that is commonly experienced, where a pharmaceutical company, for example hires researchers to research the creation of new drugs. This was the situation in the case of James Duncan Kelly and Kwok Wai Chiu v GE Healthcare Ltd [2009] EWHC 181, (PAT) . The background to the case was that the claimants were employed by GE Healthcare (the respondents) and during the course of their research, commissioned by their employer they developed an extremely profitable creation, which their employer benefitted from immensely. The case appears to contradict the statutory provisions that govern patents commissioned by employers through research in these circumstances (section 39 of the Patents Act 1977), since these provisions automatically vest the rights arising from creations made in the course of employment into the possession of the employer. The judicial analysis in James Duncan Kelly and Kwok Wai Chiu v GE Healthcare Ltd [2009] EWHC 181, (PAT) identified the rights of the employees as limited, and the “profit” they made from the venture was actually referred to as “compensation” in the judgement, but the judgement nevertheless does appear to considerably strengthen the position of the creator, where the creator is employed and assigns the rights associated with their creation to a third party (in this case, the employer) .

It may be argued therefore, that while there are considerable obligations placed upon a creator, in terms of obtaining patent protection, the developed body of patent law, regulation and rules appears to have quite an equitable approach to the enforcement of a patent, and this may not necessarily be visible within the other areas of intellectual property regulation.

Trademarks, too are a separate category of intellectual property rights that have specific characteristics. A trademark is a mark that indicates or signifies information. It is usually used to indicate that particular items have a unique source, and trademarks are commonly used by businesses or individuals, so that their products or services may be distinguished readily among potential users of the trade-marked goods or services. Problems can arise with the use of these trade marks, for example a well known brand of boots – UGG boots for example are known for their unique style, durability and quality. Another manufacturer can reproduce the boot, but use a trademark that is slightly different although not easily distinguishable from the original UGG logo. Due to the, customers identifying with the UGG brand can confuse the two, and purchase the other UGG brand. This can be potentially damaging to the original UGG provider for two main reasons. Firstly, it can divert business from the original UGG providers due to the confusion about the brand, and secondly where another provider sells poor quality boots, this can damage the reputation of the original UGG provider, where there is confusion about the trademark, due to similarity with other trademarks. These difficulties have resulted in trademarks being given intellectual property status, and legal protection. Again however, the protections offered in connection with trademarks are different from the other forms of intellectual property rights protections that have previously been discussed in the essay.

Trademarks are protected where they are used in a market, or where they are registered. In this sense there is a dual form of legal protection available in contrast with the law of copyright, which is automatic and the patent, which requires registration. In this sense the trademark may be seen as having benefits associated with copyrighted material, as well as patented material. This being said however, the rights that may be enforced by the owner of a trademark that is not registered, are far more limited than the rights that may be enforced where the trademark is registered. Furthermore, there are additional costs burdens on complainants wishing to enforce intellectual property rights in connection with an unregistered trademark.

Perhaps the main advantage of the particular operation of the trademark intellectual property right is the retrospective nature of the operation of the intellectual property right, which sets the trademark apart from the patent in many respects.

The owner of a trademark must also grapple with the changing socio-political and socio-economic developments such as the increased use of global markets to conduct trade. The internet, likewise and the range of associated technological developments that have emerged over recent years, have also changed the nature of protections available to the owners of trademarks.

In response to this the Madrid and CTM systems of trademark registration have emerged.

The Madrid system is an international system for the registration of trademarks, which enables a trademark to be registered across multiple jurisdictions. Likewise, the Community Trade Mark system is a trademark system that operates on the basis of EU policy, law and agreements. It enables trademarks to be registered across multiple jurisdictions. However, both of these systems have a single drawback – they are not fully international, and thus the owner of a registered trademark may be susceptible to infringements of their trademark intellectual property rights, where the agreements are not effective, for whatever reason. The Madrid system has proven to be the most successful, as problems have been identified with the dual approach to the protection of trademarks, under the Community Trade Mark system, given the fact that most EU jurisdictions have national schemes for the protection of trademarks, that operate in conjunction with the EU-wide one. The Madrid system however, has a more central focus and it enables the owner of a trademark to file a single application for trademark protection, and use it to obtain protection in the other jurisdictions that are subscribed to the intellectual property rights protection system. That person attempting registration does not have to apply in the other jurisdiction also, and this means that the Madrid system is widely regarded as being more cost-effective.

The situation of the creator in terms of industrial design law is essentially one that is highly specific and individual, setting it apart from the other areas of intellectual property concerns. The creator of an industrial design can acquire intellectual property rights to that design whether the design is registered or not. This sets it apart from the position of the patent. However, the structure of the design right may be seen as flawed however, given the length of time that an intellectual property right can last (usually 15 years, and 25 in some cases). The time limits that apply to patents may be seen as more justifiable, give that on many occasions the removal of the patent paves the way for cheaper drugs manufacture in developing countries.

This essay has considered four separate areas of intellectual property law –copyright, trademarks, patents and industrial design law. The characteristics of each has been evaluated and considered. Essentially each intellectual property protection provision is different with its own approach to the protection of specific types of intellectual property rights.

It has been argued that the operation of the protection and how it may be created is critical to the value of the protection offered to the creator. It has been argued that the position of the creator is arguably protected better in a situation where some form of retrospective remedy, or prior protection is given to the creator. Nevertheless, the regulation of patents, notwithstanding that it does not have this constitution, may be seen as progressive given the equitable approach to the assignment of rights from creators that are employees, to their employers that was demonstrated in the case of James Duncan Kelly and Kwok Wai Chiu v GE Healthcare Ltd [2009] EWHC 181, (PAT) .

The essay has also addressed how the changing socio-political and socio-economic climate has affected the situation of the creator in terms of intellectual property protection. It has been argued that these changes have impacted the world of intellectual property protection by making it more complex, and more onerous on particular firms and businesses in terms of operating their businesses.

It must be acknowledged however, that the framework for the operation of intellectual property protection is regulatory, and due to this it is quite impossible to have a perfect system. There will always be complexities and difficulties that arise from the very process of regulation. In the case of intellectual property protection it may be argued that the different legislation provisions that specifically target each area of intellectual property protection are unique and tailored to the particularities of their remits. Given this complex fabric, it is difficult to compare and contrast the systems, and identify one that is more flawed, or more advantageous to the situation of the creator. The writer has therefore attempted to highlight how each system may advantage and disadvantage the situation of the creator.

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Halsbury’s Laws of England and Wales (2009) Copyright (Volume 11 Paragraph 1-1108)

Halsbury’s Laws of England and Wales (2009) The Copyright, Designs and Patents Act 1988 (Volume 9 (2) Paragraph 54)

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Critically comment on the above statement with reference to effect of legislative change introduced by Labour Governments since 1997 in relation to one or more areas of individual employment rights.

I. Introduction

On the back of four electoral defeats, the Labour party sought to get the party into power by introducing a new set of ideas. Branded as “New Labour”, and under new leadership, the Party moved to the middle ground of politics.

The Party discarded policies that were perceived to be unattractive to the electorate, such as unilateral disarmament, extension of public ownership and restoring legal immunity for trade unions. Instead, the Party embraced reforms that had their origins in the late 1980s under the leadership of Neil Kinnock.

Tony Blair, as the new leader, had no objections to policy when he found himself at the helm. He insisted upon putting a draft manifesto to a ballot of members in 1996, which was subsequently duly approved. This document later emerged as the 1997 general election manifesto titled: New Labour: Because Britain Deserves Better. (my italics)

The Party made a number of bold assertions in the document, such as: Britain will be better with new Labour . The manifesto then set out the commitments and policy pledges that the Party promised to fulfil if elected. More specifically, the Party outlined a raft of ‘family friendly’ policies/commitments. In seeking to achieve this aim, the Party’s mantra was, inter alia:

‘We will help build strong families and strong communities…’

‘We Will Strengthen Family Life’

‘…..British men work the longest hours in Europe’

Work and Family

‘…..There must be a sound balance between support for family life and the protection of business from undue burdens – a balance which some of the most successful businesses already strike.’

i. The Labour Party’s Election Victory

The Labour Party’s won a landslide victory in May 1997, when it elected to office with a majority of 146 seats over its rivals. This victory was based, inter alia, on ‘New Labour’s’ ideology and the ‘10 commitments covering a range of policy pledges’ , as enshrined in the Party manifesto. It was evidently a manifesto designed to win votes. The distancing of Labour from its close Union ties was to be replaced by a commitment to ensuring that:

‘There will instead be basic minimum rights for the individual at the workplace, where our aim is partnership not conflict between employers and employees.’

This work seeks to outline the legislative changes that have been introduced by the Government of the day since arriving in office in 1997. The focus of the work is specifically targeted towards aspects of those legislative provisions that have had the greatest impact on the balance between family and working life in the UK, namely: the National Minimum Wage (‘NMW’) per se and Working Time Regulations and, more specifically, paid annual leave entitlement.

II. Legislation in the Making

i. The Case for a Minimum Wage 2006 marked the centenary for calls for the implementation of a NMW (Sanders 1906). These calls were finally realized on 31st July 1998, when the NMW Bill received Royal Assent. The system of minimum wage protection that was in operation in the UK hitherto was termed the Wage Councils (Metcalf 1981), which had been abolished in 1993. However, this system was far from perfect, inter alia, as it did not cover all sectors.

The minimum wage policy has its roots in and is clearly tied to other areas of social welfare, such as: housing, health care and public assistance. The primary goal of such a policy was to improve the income of those at the bottom of the salary scale, with the objective of furnishing an improvement in the lives on those living in a state of poverty. This would also help to ‘reduce economic inequality and social unrest’ .

The latter has proved to be one of the main causes of strikes and work stoppages. It accordingly came as no surprise when seeking to fulfil their ‘family friendly’ manifesto commitments that the Government of Tony Blair embraced the notion of a NMW by seeking to introduce legislation to achieve this end .

On being elected to office, the ‘New Labour’ government promised to introduce the legislation as soon as possible in the Queen’s speech on 1st May 1997. On 26 November 1997, as promised, the NMW Bill was introduced before Parliament. The NMW Act 1998 acquired Royal Assent on 31 July 1998.

Albeit the Act was placed on the Statue book, the Bills passage through parliament was not smooth sailing. Concerns about the impact of introducing such far-reaching legislation were made apparent during the debating sessions. Most prominent was the concern expressed about the legislations expected serious adverse implications for jobs in the UK. It was stated during a Standing Committee D debate by Mr Tim Boswell (Daventry), that experts had forecast ‘up a million job losses’ as a result of introducing the Act.

These concerns were echoed on behalf of most industry sectors. The rationale for these concerns was largely based on the premise that a NMW would increase costs for business, which could only be avoided if this put up employment until the wages bill dropped: it would lead to people pricing themselves out of jobs. Moreover, there were fears that a NMW would result in instability in ‘local and regional economies and in job markets’

Irrespective of the concerns aired, the Government remained steadfast in defending its commitment to introducing a NMW. Following the introduction of the Act, the Low Pay Commission (‘LPC’) was subsequently established as an independent statutory public body, which was established under the NMW Act 1998, in order to advise the Government about the NMW. Members of the independant LPC were appointed in July1997. Her Majesty’s Revenue and Customs was to play the role of enforcement by prosecuting offenders.

In September – November 1998, a public consultation took place on the draft National Minimum Wage Regulations (‘NMW Regulations). On 6th March 1999, the NMW Regulations received Parliamentary approval, and came into force on 1st April1999. In July 1999, the Employment Relations Act 1999 (c.26) received Royal Assent. The Act contained two NMW provisions.

At the inception of the NMW, the LPC set a minimum wage of ?3.60 per hour for adults (those aged 22 and above), which covered some 1.2 million jobs . A rate of ?3.00 per hour was set for those aged between 18-21 (development rate). A rate of ?3.00 per hour was introduced on 1st October 2004 for those between 16-17. On 1st October 2008, the NMW was set at ?5.73 for adults, ?4.77 for the development rate and ?3.53 for those between 16-17.

ii Limits on Working Time

The origins of the Working Time Regulations can be traced to the Fundamental Social Rights of Workers, which was adopted at Strasbourg on 9th December 1989. Pertaining to the regulation of working time, the following declarations were made:

‘ Every worker in the EC shall have a right to a weekly rest period and to annual paid leave…..to ensure the safety and health of Community workers, the latter must be granted minimum daily, weekly and annual periods of rest and adequate breaks.’

Prior to the introduction of the Working Time Regulations, legislation had never been introduced restricting the number of working hours. Before to the introduction of the aforementioned legislation, the labour market operated under an industry-based system known as the Wages Council (see Dickens, Machin and Manning, 1999; Machin and Manning, 1994), which was abolished in 1993.

As noted at the outset, however, the impetus for the legislation has its source in the European Union (‘EU’). EU law became an increasingly more important source of employment rights in the 1990s. This stemmed from the agreement on the Social Charter in 1989 and as a result of European Court of Justice (‘ECJ’) case law, albeit the UK opted out of the Social Charter until 1997. When Labour was handed over power, there were no nationwide legislative provisions regulating working time in the UK. Whilst that is the case, the Working Time Directive 93/104/EC should have been implemented by all Member States by 23 November 1996. The Directive was adopted pursuant to Article 138 (previously Article 118) of the Treaty of Rome, as amended by the Amsterdam Treaty. The Directive, which is strictly health and safety legislation, only required majority consent for its implementation. The legislation provided rights for workers of 4 weeks paid annual leave, minimum daily/weekly rest periods and a maximum 48-hour working week. The UK, however, failed to implement the Directive on time. In fact, the Conservative Government of the day, challenged the legality of the Directive (see United Kingdom v Council of the European Union (1997)). The UK did, however, eventually implement the Directive by introducing the Working Time Regulations 1998 (SI 1998/1833), albeit two years late. The original Regulations were subsequently amended by the Working Time Regulations 1999 (SI 1999/3372) to address a number of uncertainties in their original form. There have been successive amendments since in response to revisions, which have effectively broadened the remit of the legislation, inter alia.

The Working Time Directive (93/104/EC) has now been repealed and replaced by the Working Directive (2003/88/EC), which came into force in August 2004.

III. Impact of Legislative Changes

i. National Minimum Wage Act 1998 (c.39) (‘NMWA 1998?) The Act was introduced on 1 April 1999, and the National Minimum Wage Regulations 1999 (SI/1999/584) (‘NMW Regulations’) was soon after adopted by virtue of s 2 of the Act. S 1(1) of the NMWA 1998 imposes an obligation on employers to pay workers in any pay reference period, at a rate no less than the NMW. Pursuant to Regulations 10(1) and (2) of the NMW Regulations, a pay reference period is one month, or a shorter period in cases in which workers are paid in shorter intervals.

Under the Act, the entitlement of the NMW belongs to a worker in accordance with s 54(3) of the Act. The meaning of both “worker” and “employer” are given broad definitions under the legislation. All those qualifying as workers according to s 54(3) of the NMW Act 1998 are entitled to the NMW, providing s/he is working in the UK and is no longer of compulsory school age (see s 1(2) of the Act). A worker includes those working under a contract of employment and those under other applicable contracts . This also includes the likes of agency workers (see s 34 on the NMWA 1998) and home workers (see s 35 of the NMWA 1998) .

An example of how the courts have approached this problem can be found in the case of Wolstenholme v Post Office Ltd [2003] ICR 546. In the Wolstenholme case, the Employment Appeal Tribunal held that a sub-postmaster and postmistress were not workers, because they had a choice whether or not to do the work themselves. Furthermore, in the notable case of Edmonds v Lawson [2000] ICR 587, the Court of Appeal held that a pupil barrister was not a worker. Following the decision in Carmichael v National Power plc [1999] ICR 1226, almost certainly the definition of worker applies to casual workers also.

Ultimately, the definition of a worker in the NMWA 1998 can be analysed similarly to other definitions of a worker in employment law: See Bamford v Persimmon Homes N W Ltd UKEAT/006/06 (HH Judge Peter Clark presiding), and Green v St Nicholas Parochial Church Council UKEAT/0904/04 (Rimer j presiding).

In the event of a complaint about minimum wage, the person responsible is regarded as the person providing the salary (see s 34 NMWA 1998). By virtue of s 28(1), there is a presumption that an individual who claims to be covered by the Act does fall within its terms. This in turn places the burden of proof on the employer to prove that the complainant is not a worker for the purpose of the Act.

Those under 18 years of age were not covered at the outset (see Regulation 12(1) of the NMW Regulations 1999). However, these provisions were omitted by virtue of Regulation 3 of the National Minimum Wage Regulations 1999 (Amendments) (No.2) Regulations 2004 (SI 2004/1930), which were given effect from 1st October 2004. However, the NMW does not apply to self-employed people, volunteers, those between 16-17 on apprenticeships, those over 18 but under 26 during the first twelve months of their apprenticeships (see Regulation 2(5) and(8)), member of the armed forces and people working and living as part of a family unit (see Regulations 2(2) – (4) of the NMW Regulations 1999).

In determining the rate of remuneration to be paid, the NMW Regulations 1999 define different categories of work: Time work; Salaried hours work; Output Work and Unmeasured Work (see Regulations 3 – 6). As to what qualifies as ‘working time’, the case law has indicated that this is to be interpreted broadly. In Scottbridge Construction Ltd v Wright [2003] IRLR 21, the Court of Session found that time spent by a night watchman on the employer’s premises counted as working time, albeit he was entitled to sleep. Furthermore, in British Nursing Association v Inland Revenue [2002] EWCA Civ 194; [2003] ICR 19, time spent at home waiting to answer the telephone on employer’s night time service was deemed to be ‘working time’.

The procedure for determining the NMW is set out at Regulation 14 of the NMW regulation 1999. Essentially this is calculated by taking the remuneration for the pay reference period and dividing it by the number of hours worked.

By virtue of s 17 of the NMWA 1998, the entitlement to a NMW is implied into the contract of employment. Accordingly, a failure by an employer to pay an employee at least the NMW for work carried out will give rise to a claim in the civil courts or the employment tribunal for a breach of contract, or more specifically an unauthorized deduction from wages, inter alia.

A complaint can also be made to HM Revenue and Customs who actively enforce non-compliance with the legislation.

Finally, a number of changes have been introduced by the Employment Act 2008, which came into force on 6 April 2009. These changes set out at sections 8 – 14 largely relate to non-compliance issues pertaining to the NMWA 1998.

ii The Working Time Provisions

a. The Definition of Worker

As is the case for the NMW, the Working Time provisions apply to workers. The meaning of worker is given the same definition as that under the NMW legislation. In the case of Redrow Homes (Yorkshire)Ltd v Wright [2004] EWCA Civ 469; [2004] 3 All ER 98, a group of bricklayers who had sub-contracted to carry out work, were deemed to be workers for the purpose of this legislation because they were obliged to perform work personally. According to Pill LJ’s observation in the Redrow case, the issue is whether the person is contractually obliged to carryout the work in question (see [2004] 3 All ER 98, at para. 21). However, the remit of the legislation does not extend to children, as noted in Addision v Ashby [2003] ICR 667, where a paper boy was found not to be entitled to annual leave.

All workers are covered by the legislation except: (i) jobs where you can choose freely how long you will work; (ii) the armed forces, emergency services and police are excluded in some circumstances; (iii) domestic servants in private houses; (iv) sea transport workers; and (v) mobile workers in inland waterways and lake transport workers on board sea going fishing vessels

b. Paid Annual Leave Entitlement

The significance of qualifying as a worker can not be under estimated, as pursuant to regulation 13(1)(c) of the Working Time Regulations (SI 1998/1833) (‘WTR 1998?), a worker is entitled, inter alia, to 4 weeks paid annual leave each year. Any provisions within a contract, claiming that there is no entitlement to paid leave have been held to be void: The College of North East London v Leather, EAT (30/11/01). The paid annual leave entitlement has been extended by Regulation 13A, which was introduced by Regulations made under the Work and Families Act 2006. In effect, this will mean an extra 8 days leave for those working a standard 5 day week. This is aimed at giving workers leave on bank and public holidays in addition to the regular 4 weeks leave period. Also, pursuant to Regulation 13, part-time workers are entitled to leave, but on a pro-rata basis.

Young people between the ages of 16-18 are not normally entitled to work more than 8 hours a day or 40 hours per week .

The original qualifying period of 13-weeks was challenged in the European Court of Justice by the Broadcasting, Entertainment, Cinematographic and Theatre Union (BECTU). Many of BECTU’s members work on short-term contracts, which resulted in complications about how to arrange paid annual leave on such contracts. The qualifying period was found to be inconsistent with the European Working Directive, and as such workers were found to have accrued paid leave entitlement from their first day at work: See R v Secretary of State for Trade and Industry ex parte BECTU [2001] ECR I-4881

Working Time (Amendment) Regulations 2001 (SI 2001/3256), which came into effect on 25th October 2001, introduced provisions implementing the Working Time Directive which provide employees with the right to paid leave upon immediately commencing employment, instead of after 3 months, as was hitherto the case.

c. “Rolled Up” Rate

A number of employers tried to overcome the aforementioned problem by inclusion of an element of holiday pay in their worker’s salary, or as it was commonly known “rolled up” rate. However, whilst this was regarded as a genuine attempt to combat the problem in some cases, in others, employers made spurious claims that the “rolled up” rate included holiday pay when it did not. This very point came before the European Court of Justice (‘ECJ’) in the joined appeals of Robinson-Steele v RD Retail Services Ltd; Clarke v Frank Staddon Ltd; Caulfield and Others v Hanson Clay Products Ltd [2006] IRLR 386 ECJ. All the cases involved workers who had been paid so called “rolled-up” holiday pay. The Court of Appeal and the Scottish Court of Session differed in their opinions about the permissibility of this type of pay. The matter was accordingly referred to the ECJ for its ruling. In its judgment, the ECJ stated, inter alia:

‘….By those questions the referring courts are asking, in essence, whether Article 7 of the Directive precludes payment for minimum annual leave within of that provision from being made in the form of part payment staggered over the corresponding annual period of work and paid together with the remuneration for work done…

The Directive precludes the payment for minimum annual leave within the meaning of that provision from being made in the form of part payments staggered over the corresponding annual period of work and paid together with remuneration for work done, rather than in the form of a payment in respect of a specific payment during which the worker actually takes leave.’

d. The New Rates

With effect from 2 August 2004, the Working Time Directive 93/104/EC and 2000/034/EC were revoked and consolidated by Working Directive 2003/88/EC, which introduces new annual holiday entitlements. These new rates are being phased in from October 2007 to April 2009 by the implementation of the Working Time (Amendment) Regulation 2007 (SI 2007/2079). Whilst public holidays can be taken as annual leave entitlement, there is no automatic right for employees to have leave on public holidays, unless their contract so provides: see Campbell & Smitth Construction Group Ltd v Greenwood (2001) IRLB, 667, 10. Furthermore, a rest period could not amount to annual leave as noted in Gallagher and ors v Alpha Catering Services Limited [2005] ICR 673 (CA).

e. What Constitutes ‘Working Time’?

In so far as what amounts to ‘Working Time’ for the purpose of the WTR provisions, this is to be construed as time in which the worker is:

(i) Working; (ii) at the employer’s disposal; and (iii) carrying out his duties.

A notable case in which the ECJ considered this point is Sindicato de Medicos Consumo de la Generalidad Valenciana (Case C-303/98) [2001] ICR 1116. The question faced by the ECJ was whether or not time spent by doctors “on call” during which they were required to be present at the health centre was ‘working time’ for the purpose of the Directive. It was found that those doctors who were required to be present and available at the centre were working, whereas those who are only required to be contactable at all times but not physically present at the health centre are not deemed to be working, unless they were providing health care services.

f. Complaints and Enforcement

In the event that an employee alleges that s/he is denied the above rights, they must set out their complaint in writing and submit it to their employer in the first instance. If the complaint is not resolved satisfactorily, they may initiate proceedings in the employment tribunal, but such a claim must be made within 3 months of the act or omission complained of having first arisen. If successfully argued, a claimant could receive compensation and /or a declaration of their rights. Any award would be calculated according to what is just and equitable in the circumstances or, if the claim pertains to holiday entitlement upon termination of employment, what is owed to the claimant.

IV. Conclusion

The NMW and the WTR have undoubtedly been the most influential pieces of legislation of the current Government’s legacy to date. In fact, the very electorate who voted them in office afforded the former the honour of being Tony Blair’s greatest legacy before he left office .

At least in relation to the NMW, it can be categorically stated therefore that irrespective of the stern opposition during the Bill’s passage through Parliament, the Party’s decision to introduce the NMWA 1998, has largely proved to be a success without the concern about mass job losses manifesting. In fact, according to a study carried out titled the Impact of the National Minimum Wage on Profits and Prices: Report for Low Pay Commission, the effects of the NMW on employment have been tenuous, if not non-existent (Machin; Manning and Rahman, 2003; Stewart 2004). The focus of that particular study was placed on whether or not minimum wages priced workers out of jobs, one of the main concerns raised during the legislations passage through both Houses. This particular concern was not unfounded however, as it had also been predicted by labour market theorists (Borjas, 2004; Brown, 2003). The focus of the same study also concentrated on whether there is any effect on employment at all, as emphasized in so-called ‘revisionist’ circles. (Cord and Krueger, 1994)

Whilst the NMW is about to celebrate its eleventh anniversary, evidence of its success is axiomatic by concerns which arose about the perceived threat to NMW rules by the introduction of discriminatory legislation, such as the Employment Equality (Age) Regulations 2006 (SI 2006/1031). The Employment Equality (Age) Regulations 2006 came into force on 1st October 2006, and would permit tens of thousands of workers who are ‘fit and healthy’ to continue working past the age of 65, thereby prohibiting direct and indirect discrimination against them. In one article, it was claimed that the NMW, could be challenged as being discriminatory, given that workers under 21 can be paid less than their older counterparts . It was felt that this would result in job losses. On the whole, however, studies on the NMW suggest that the “minimum wage has not only significantly reduced the incidence of low pay, it has also helped to contain wage inequality” (Fitzner, 2006, p.14).

The effects of the European Working Time Directive, on the other hand, are still being felt. Whilst the Directive applies to most sectors, the National Health Service is a sector which is currently in the process of trying to ensure that it meets the August deadline for doctors in training. The Directive currently applies across all clinical and staff groups. In relation to junior doctors, however, the 48 hour working week has been being introduced incrementally. In 2004, the hours were reduced to 58 per week, in 2007 they were reduced to 56, and the final shift is 48 hours per week by 1st August 2009. It is expected that by this date all services (bar 24-hour patient care) will work a 48 hour a week. The implications for failing to meet the deadline could be dire for the Trust, as this could mean penalties for non-compliance. These can be awarded by employment tribunals, or alternatively orders for compliance being issued by the Health and Safety Executive, and ultimately fines. It was suggested in April 2008 that “53.4% of junior doctors were estimated to be compliant”. If the deadline is missed, the UK could also face enforcement proceedings by the European Commission for non-compliance.

On the whole, however, what is apparent is that the legislation introduced by the Labour Party since taking up office in 1997 has drastically changed the landscape of individual employment rights in the UK. Admittedly, in relation the Working Time Regulations, these changes were spearheaded and thrust upon the Government by the European Union. Whilst that may be the case, it cannot be denied that the NMW and the WTR regulations have collectively worked in tandem to improve the working conditions for hundreds of thousands of workers in the UK, and ultimately contributed to providing workers with the discretion to decide on how to strike the right balance between their family and working life commitments.

Bibliography

Text Books:

The City Law School, City Law School (London, England), Employment Law in Practice, 8th Edition, 2008, Oxford University Press US

David Farnham, Employee relations in context, Institute of Personnel and Development, 2nd Edition, 2000, CIPD Publishing

Gwyneth Pitt, Cases and Materials on Employment Law, 3rd Edition, 2008, Pearson Education

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Assortment of Cases:

Addision v Ashby [2003] ICR 667

Bamford v Persimmon Homes N W Ltd UKEAT/006/06

British Nursing Association v Inland Revenue [2002] EWCA Civ 194

Campbell & Smitth Construction Group Ltd v Greenwood (2001) IRLB, 667

Carmichael v National Power plc [1999] ICR 1226

Edmonds v Lawson [2000] ICR 587

Gallagher and ors v Alpha Catering Services Limited [2005] ICR 673 (CA)

Green v St Nicholas Parochial Church Council UKEAT/0904/04

Jaeger [2003] IRLR 604

Mrs P James v Redcats (Brands) Ltd UKEAT/0475/061

R v Secretary of State for Trade and Industry ex parte BECTU [2001] ECR I-4881

Redrow Homes (Yorkshire)Ltd v Wright [2004] EWCA Civ 469

Robinson-Steele v RD Retail Services Ltd; Clarke v Frank Staddon Ltd; Caulfield and Others v Hanson Clay Products Ltd [2006] IRLR 386 ECJ

Scottbridge Construction Ltd v Wright [2003] IRLR 21

Sindicato de Medicos Consumo de la Generalidad Valenciana (Case C-303/98) [2001] ICR 1116

The College of North East London v Leather, EAT (30/11/01)

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Wolstenholme v Post Office Ltd [2003] ICR 546

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Employment Relations Act 1999 (c.26)

Employment Rights Act 1996 (c.18)

Employment Act 2008 (c. 24)

National Minimum Wage Act 1998 (c. 39)

Work and Families Act 2006 (c. 18)

Secondary Legislation:

Employment Equality (Age) Regulation 2006 (SI 2006/1031)

National Minimum Wage Regulations 1999 (SI/1999/584)

National Minimum Wage Regulations 1999 (Amendments) (No.2) Regulations 2004 (SI 2004/1930)

Working Time Regulation 1998 (SI 1998/1833)

Working Time Regulation 1999 (SI 1999/3372)

Working Time (Amendment) Regulations 2001 (SI 2001/3256),

Working Time (Amendment) Regulation 2007 (SI 2007/2079)

European Community Directives:

Working Time Directive (93/104/EC)

Working Time Directive (2000/034/EC)

Working Directive (2003/88/EC)

Young Workers Directive 94/33

Journals / Additional Materials

Age Discrimination Threat to Minimum Wage Laws: Economic Experts Fear New Laws Will Lead to Job Losses, 29 September 2006, Journalonline.co.uk

David Metcalf, Why has the British National Minimum Wage Had Little or No Impact on Employment?, April 2007, Centre for Economic Performance, CEP Discussion Paper No. 781.

Department of Trade and Industry, National Minimum Wage: A Detailed Guide to the National Minimum Wage, Revised October 2004.

Ingrid Torjesen, Working Hours Target Deadline Fast Approaching, 6 April, 2009, Health Service Journal (www.hsj.co.uk)

Leanna Maclarty, Trainee was Paid Under Half Minimum Wage, 29 June 2009, The Press and Journal (www.pressandjournal.co.uk

Mirko Draca, Stephen Machin and John Van Reenen, The Impact of the National Minimum Wage on Profits and Prices: Report for Low Pay Commission, February 2005 – Revised, Centre for Economic Performance, London School of Economics.

National Minimum Wage Bill in Standing Committee D, Select Committee, first sitting, 13th January 1998

National Minimum Wage Bill in Standing Committee D, Select Committee, second sitting, 15th January 1998

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This work was produced by one of our professional writers as a learning aid to help you with your studies

Discuss the difference between the way the law treats married and unmarried couples. Do you think there should be such differences legally? Does the law on cohabitation, marriage and divorce need reform?

There are several ways in which married couples are treated differently to unmarried couples. Most of the differences occur in respect of money issues and generally become apparent on the death of one of the parties or when the parties separate .

Issues that are handled differently with married couples include capital gains tax , wills , inheritance tax , pensions and issues where children are involved. This includes children from former relationships as well as from their present relationship .

When examining the law surrounding capital gains tax and inheritance tax the law will treat unmarried couples as two separate individuals when dealing with these matters. By treating them this way they are taxed individually. In situations were the couple are married capital gains tax and inheritance tax would be avoided altogether. An unmarried couple would have to pay both if one of the partners dies.

When assessing capital gains tax according to tax legislation all people have an allowance of ?8,000 before they have to pay tax. Married couples get allowed twice this amount per year and can avoid paying such tax by transferring assets to the partner who earns the lowest . Unmarried couples are governed by the allowance and cannot avoid tax in this manner.

Similarly the law on inheritance tax is set at ?285,000 for anyone who is not married. Inheritance tax includes the price of any property that is left to the beneficiary which makes it so that a lot of people will be subject to this tax given the recent huge increase in house prices. With married couples the whole of the estate can pass to the surviving spouse without being subjected to any inheritance tax regardless of the amount inherited .

For those who are not married a will is essential as it would be unlikely for the partner to be able to inherit anything from their deceased partner’s estate without a will . Such a will has to specifically name the partner as a personal representative of the deceased in order for the surviving partner to be able to administer the will. In cases where unmarried couples have failed to make a will the partner has occasionally not received any property or money from the estate of the deceased .

By contrast in cases where the couple are married and the parties have not made a will the estate and any other possessions of the deceased will automatically be awarded to the surviving spouse in cases where there are no children from the relationship . If they do have children then a proportion of the inheritance would be reserved for the children.

Problems have also arisen in respect of pensions . The government has attempted to address this issue just recently but as yet the new proposals have not been implemented so it is debatable as to whether unmarried couple would be entitled to the pension or not. In general most employers do not consider cohabiting couples in respect of payments for death in service . Those who are cohabiting can make it so that their partner does benefit by naming the intended beneficiary in the policy .

Couples who are not married can also face difficulties if one of the parties needs medical treatment. With a married couple the spouse is regarded as the next of kin and can give permission for surgery or treatment if the other party is unable to do so because of their condition. With an unmarried couple the other party is not classed as the next of kin and therefore the hospital have to assume the role of deciding what treatment is in the best interests of the patient. Similarly if one of the parties dies the unmarried partner is not allowed to deal with the funeral arrangements unless there is no surviving next of kin to handle the arrangements. Unmarried partners are not entitled to register the death of their partner unless they were the one that came upon the partner after they died. They would not be able to register the death as the partner of the deceased and would merely be classed as the person authorised to arrange the funeral.

Cohabiting couples can also face problems if the relationship comes to an end and they decide to separate. Some have made preparation for such eventualities by drawing up cohabitation agreements . Within a cohabitation agreement the couple can include how the property and items within the property should be distributed in the event of the couple deciding to split up.

One of the biggest areas of contention usually concerns the house on which the couple have been living. Both married and unmarried couples can reside in the property either as tenants in common or as joint tenants. Where the property is registered in the names of both parties they each will have equal shares regardless of whether they are married or not. Difficulties arise where the property has only been registered in one name. In some instances the courts will be asked to decide whether the property should belong to the name person only or whether the other party should be entitled to a share. The courts are free to infer joint ownership using the principle of implied or constructive trusts . A constructive trust could be inferred if the actions of the parties would appear to suggest that they expected to have an interest in the property. This assumption can be made from evidence showing direct contribution to the household bills or to repairs in the property . Evidence that money was paid towards the purchase price could lead to the presumption of a resulting trust which would entitle that party to a direct share of the property.

With a married couple the courts will often allow the spouse to remain in the family home regardless of whether the property has been registered in that person’s name or not . The Matrimonial Proceedings and Property Act 1979 s37 entitles married partners to remain in the home even if the property was only registered in one of the couple’s names.

It is not only mortgaged or owned properties that can cause these problems. Rented accommodation can be problematic especially with local authority housing as the council will often not allow the property to transfer to the partner not named on the agreement if the couple are not married. Married couples are more fortunate and it is more likely that the council would allow the transfer to a spouse . Difficulties with transferring rented properties to unmarried partners have occurred on a number of occasions and also affect same sex couples as well as heterosexuals .

Jointly owned properties can be transferred to either spouse or partner at the order of the courts, and particular regard is likely to be given to the issue of children within the relationship. In some instances the court will order that the property is to be settled, especially where there are children to consider. With a settled property the parent with control of the child would be entitled to remain in the property until that child attains the age of 18 .After this time the property would be ordered to be sold and the profit from the equity to be split.

A further issue that is different for married couples to unmarried couples is that with a married couple the wife is usually entitled to financial support for both her and her children . An unmarried person is less likely to be granted financial support. Most unmarried couples find it difficult to prove that they were a couple. When making awards to unmarried couples the courts will look for evidence that the couple were acting in a manner that could be regarded as a marriage . It is the responsibility of the couple to provide the necessary proof to demonstrate that they regarded themselves as though they were married. Failure to provide this proof can lead to the courts rejecting any application with regards to the family home or financial support of any kind .

Difficulties can also arise in respect of children from the relationship in situations where the parents are not married. With a married couple both parents will have automatic parental responsibility for any children born inside the marriage . Unmarried couples are treated differently with the father of the child only being granted parental responsibility if he attends with the natural mother to register the birth or if he applies to the courts for parental responsibility in cases where the mother refuses to allow him to have parental parental responsibility.

Registering the child’s birth is also different depending on whether the couple are married or not. Under s9 of the Registration of Births and Deaths Regulations 1987 the birth must be registered by a qualified informant. Married couples are both classed as qualified informants . In an unmarried couple situation only the mother is a qualified informant and the father can only appear on the child’s birth certificate if the natural mother agrees to him being included. An unmarried father would only be entitled to register either by a statutory declaration made by the natural mother or through a court order .

The government has attempted to address the unfairness in the present system for same sex cohabiting couples through the introduction of the Civil Partnership Act 2004. The introduction of this Act only affects those that have undergone a civil ceremony to have their relationship formally recognised. For those that have had a civil ceremony legislation protects their rights with regard to property and finances in much the same way as with married couples.

At present the government has still got to ratify the Relationships (Civil Registration) Bill. This commenced its journey through Parliament in 2002 but as yet has not been made law. Once the Act is passed cohabiting couples will have similar protection to married couples despite there having been no formal ceremony undertaken. There have been many objections to this Bill, the most important of these being the assertion that allowing the Bill to be passed would undermine the whole notion of marriage. Many believe that if the Bill becomes law there will no longer be a need for anyone to get married as they can acquire the same rights as married couples by relying on the Bill.

The Bill if introduced would entitle cohabiting couples to register their relationship in a similar way to marriage which would give them tights in respect of inheritance, housing problems, pensions, social security payments and immigration as well as other areas. Under the Bill if the couple decide to separate then the registered partnership could be dissolved twelve months after dissolution has been applied for.

The Solicitor’s Family Law Association has backed the proposal for new laws on cohabiting couples. They believe that the existing law is too ambiguous and does not adequately meet the needs of those who have chosen not to marry but to cohabit. Concern has been raised that the proposed Bill would effectively amend social security legislation and place registered partners in the same position financially as married couples.

The Law Commission in their paper in July 2007 entitled ‘Cohabitation: The Financial Consequences of Relationship Breakdown’ examined couples living together outside of marriage to decide whether any remedies could be suggested to make things more equal for couples when they separate or one of the parties dies. They felt that financial provision should be made under the Children Act 1989 where there are children from the relationship. They also felt that in circumstances where the cohabitant dies intestate the surviving partner should have automatic rights to inherit. At present cohabitants can only benefit from the estate under the Inheritance (Provision for Family and Dependants) Act 1975 which will grant them a discretionary award on the basis of the needs of the surviving partner.

Argument has surrounded providing further protection through legislation for cohabiting heterosexual couples on the basis that it would be unfair to give them the same rights as married couples and not have the same hurdles for them to overcome in the event of the relationship breaking down. At present married couples wishing to end their relationship have to go through the formal process of divorce which can be extremely costly. Cohabiting couples can just go their separate ways without the need to make the separation formal. Under the Civil Partnership Act 2004 same sex couples have to undergo the equivalent of a divorce in order to dissolve the relationship.

It is difficult to reach a firm conclusion as to whether the law in this area required revising as the argument that a cohabiting couple should marry if they want to protect their rights seems to be a very valid proposition. Couples who choose to cohabit often do so because of the ease at which the relationship can be brought to an end in the event of things going wrong in the relationship. Simplifying the law on divorce and reducing the amount it costs to obtain a divorce might encourage more cohabiting couples to get married. The removal of tax benefits such as the MIRAS scheme has also meant that many couples that might previously have married to gaining such benefits no longer feel the need to.

The recent changed in the law in respect of parental responsibility have also done little to promote marriage as a positive element. Previously parental responsibility could only be obtained through an order of the court. Since December 2003 the father of the child gains automatic parental responsibility if they are named as the father on the birth certificate at the time that the baby is registered.

It could be argued that not protecting the rights of unmarried couples is tantamount to forcing them to enter into a marriage in order to receive the benefits attached to married couples. However, the counter argument from those opposed to cohabitation is that the ceremony is only a formality and that if the couple intend to stay together regardless then it should not matter if they are made to undergo a formal marriage ceremony.

The conclusion that can be drawn from the above is that there is a great deal of unfairness in the way that cohabiting couples are treated as opposed to married couples. By providing legislation to protect their rights in a similar manner to the rights of married couples would undermine the whole purpose of marriage and make it more tempting for couples to opt for cohabitation as opposed to marriage as it is easier and less costly to get out of a cohabiting relationship then a married one. Simplification in divorce proceedings and a less costly way of handling divorce might give cohabiting couples the necessary incentive to undergo a formal marriage ceremony.

Bibliography

Cretney, S.M& Masson, J M, Principles of Family Law, 6th Ed, 1997, sweet & Maxwell

Gravells, N P, Land Law Text and Materials, 2nd Ed, 1999, Sweet & Maxwell

Inns of Court School of Law, Family Law in Practice, 5th Ed, 2001, Oxford University Press

Oldham, M? Statutes on Family Law, 10th Ed, 2002, Blackstone’s
The Child Support Agency, Child Support Handbook 2001/2002 CSA Standards of Service

The Law Commission in their paper in July 2007 entitled ‘Cohabitation: The Financial Consequences of Relationship Breakdown’

Thomas, M, Statutes on Property Law, 8th Ed, 2001, Blackstone’s

http://www.oneplusone.org.uk

http://news.bbc.co.uk

http://www.hmrc.gov.uk

http://www.taxationweb.co.uk

http://www.crossmans.co.uk

Table of Cases

Crake v Supplementary Benefits Commission [1982] 1 All ER 498

Drake v Whipp [1996] 1 FLR 826

Fitzpatrick v Sterling Housing Association Ltd [2001] 1 A.C. 27 [1999] 3 W.L.R. 1113 [1999] 4 All E.R. 705 [1999] 2 F.L.R. 1027 [2000] 1 F.L.R. 271 [2000] 1 F.C.R. 21 [2000] U.K.H.R.R. 25 7 B.H.R.C. 200 (2000) 32 H.L.R. 178 [2000] L. & T.R. 44 [2000] Fam. Law 14 [1999] E.G.C.S. 125 (1999) 96(43) L.S.G. 3 [1999] N.P.C. 127 (2000) 79 P. & C.R. D4 Times, November 2, 1999 Independent, November 2, 1999

Gissing v Gissing [1971] AC 886

H v M ( Property: Beneficial Interest) [1992] 1 FLR

Leadbetter v Leadbetter [1985] FLR 789

Lloyds Bank Plc v Rosset [1991] 1 AC 107

Mesher v Mesher [198] 1 All ER 126

Ungurian v Lesnoff [1990] Ch 206

Table of Statutes

Administration of Estates Act 1925

Children Act 1989

Family Law Act 1996

Inheritance (Provision for Family and Dependants) Act 1975

Law of Property (Miscellaneous Provisions) Act 1994

Law of Property Act 1925

Matrimonial Proceedings and Property Act 1979

Pensions Act 2004

Registration of Births and Deaths Regulations 1987

Relationships (Civil Registration) Bill

Will Act 1837

This work was produced by one of our professional writers as a learning aid to help you with your studies

Introduction

The question in this case refers to the creation of a trust, i.e. the formalities that are required. In the case of Serena, she has created a trust that holds the property in trust for Alice for life and then the remainder goes to Alice’s children. On the death of Serena, there is a valid will where Alice gets all of the property and there is no interest for Alice’s children. Therefore, the following advice is going to identify a trust is in place, which will ensure that the property transfers to the children.

The Creation of a trust

The case of Milroy v Lord identifies a perfect trust, which includes; 1) a deed of the trust; and 2) transfer of the property following all formalities . Therefore, in the case of the trust created by Serena, both the property “Hillside” and the Jane Austin books have the capability of being part of a perfect trust. However, in the case of the land there are additional formalities, which will be discussed later. At this point there is a perfect trust that related to the books, because this is a case of a perfect trust, because there is both declaration and transfer of the books to the trustees . The share certificate and cheque are not in the deed documents, but have been transferred to the trustee with the declaration “to be added to the trust”. This is not a full deed, but applying the case of Milroy v Lord it is a declaration plus transfer of the property, which means that it has a capability of being a trust under Neville v Wilson and Vandervell v IRC . The argument still remains on whether the formalities have been fulfilled in the case of the land, shares and cheque which can be a contentious subject.

The need for formalities?

The case of Neville v Wilson held that the formalities of a trust need not be in writing if it can be shown that intention is present; however, problems have arisen in showing this intention, which is why the Statute of Fraud 1677 introduced the need formalities A similar argument that there is no need for formalities was expressed in the case of Walsh v Lonsdale in 1882; however as it can be seen in 1925 the formalities were required for all property under a trust. However, it seems to be that the argument for these formalities is that they clarify the intention of the settlor.

S. 53(1)(c) of the Law of Property Act 1925 (LPA 1925) is now the defining piece of legislation for where trust formalities can be identified. In the case of Timpson’s Executers v Yerbury it was held that the formalities of a trust can be identified in the written disposition of the trust and the transferring of the property to the trustees. The interest in respect to Uncle Joe’s Trust is an equitable interest; therefore should comply with s. 53(1)(c). As this trust is in the original deed then it complies with the formalities of 53(1)(c) an like the Jane Austen’s novels form a perfect trust, as the deed identifies both the intention and the transfer of the “equitable interest” to the new trust. The shares are another example of an equitable interest; however as will be discussed later may not form a perfect trust due to deficiencies in formalities.

In the case of Alice some of the property has been adequately transferred through deed and transfer to the trustees; however there remain questions if the whole trust can be properly administered. If one considers the case of Neville v Wilson the indication is that the requisite intention is enough. However, the problem is that Neville v Wilson is in direct contradiction with s. 53(1)(c) of the LPA 1925, which states that “a disposition of an equitable interest… subsisting at the time of the disposition, must be in writing signed by the person disposing of the same, or by his agent thereunto lawfully authorised in writing or by his will”. This would mean, the prima facie facts of the case, are that all of the property would have to be in the initial trust deed in order for it to be transferred on trust to Alice; whereby anything outside of it would return to the estate. However, it is not as simple as this. The case of Neville v Wilson needs to be reconciled and there are additional formalities required in respect to shares and land.

The Transfer of the Land:

In the case of the land s. 53(1)(b) states that a “declaration of trust respecting any land or interest therein must be manifested and proved by writing signed by the person who is able to declare such trust or by his will.” Therefore, the land must be transferred by deed to the trustees, which has been done in the case of Hillside; therefore it would indicate that as soon as the deeds to the property were transferred to the trustees the land has been moved into a trust. The exact route of transfer has been identified in the Law of Property (Miscellaneous Provisions) Act 1989 s. 2, which identifies that the deed needs to be properly signed by each party in the transfer . This means that the trustees must have signed for the exchange and the deeds in this case. The implication of this is not clear as the deed document has been transferred to the trustees, but the question is whether this deed shows the trustees as the legal owners, if not then the formalities have not been fulfilled and the property has not passed, as per the case of Firstpost Homes v Johnson .

The Shares:

In the case of the shares, as an equitable interest, s, 53(1)(c) should be followed, which means that the shares should be deeded and in writing, as well as entered into the company books as registration of change . In the case of shares the formalities are important, because like land there are external legal formalities that must be complied with. Therefore, if the settlor had not begun the steps to transfer the shares, with the company, then regardless of whether there was an intention and the share certificates were placed in the hands of the trustees the constitution had not been fulfilled . This was the approach that has been taken in Grey v IRC and Oughtred v. IRC ; however Vandervell held that if the deeds and the shares had been transferred to the trustee then it will be implied that the trust is perfect. A similar approach was taken in Re Rose and Hunter v Moss where transferring the correct information to the company was enough, as it was in the hands of a third party. The problem in this case is that there is no formal deed, even though the shares have been transferred. This means that the trust is not properly constituted in respect to the shares and would go back to the estate.

The Cheque

As this is a chattel the case of Neville v Wilson will apply, because the requirements of Milroy v Lord have been fulfilled and a perfect trust will be implied.

Duty of the Trustee and Remedies:
Introduction:

The case of Alan relates to the duty of a trustee, a breach of trust and the equitable remedies that are available. Alan is a director of a company that holds a trust for the holidays that it sells on behalf of Go Ltd, which is separated from Buyit Now’s accounts. The question that is raised is whether the actions of Alan, by; 1) failing to put the money into BuyIt now are accounts; and 2) taking money out of Go Ltd’s account to purchase a gift for his girlfriend, are a breach of trust. Then it will consider if it is a breach of trust what remedies are available to reclaim the lost money. The first part of this question will identify the duty of the trustee and the implications for the other directors of Buyit Now. Then it will consider what remedies are available to Go Ltd to retrieve the lost money.

Duty of the Trustees:

The administration of a trust is set out by the Trustees Act 2000 (TA 2000). Section 1 of the act defines the duty of case requirements that the trustee must adhere to, which is to “exercise such skill and care as reasonable in all circumstances”. The implication of this is that there is a minimum test for the private trustees as a reasonable trustee . However, s. 1 TA 2000 put the decision of Speight v Gaunt into statutes, highlighting that this is a higher duty of case for any trustee with “special knowledge or experience” should take “all those precautions which an ordinary prudent man of business would take in managing similar affairs of his own” . This means that in the case of Alan and the directors of the company they owe a standard of care of a company director . It is also important as this trust has been set up in the course of the company’s business that s. 1(b) of the TA 2000 will apply, which means that the level of the duty of care will be that which is “reasonable to expect of a person acting in the course of that kind of business” . It is important to note that the Nestle Case identified that a trustee cannot be held in breach of trust for a mere error of judgement. It must also be identified that as this is a company/industry arrangement there may be an exclusion clause in place that limits liability. This is a perfectly valid approach and upheld in the case of Armitage v Nurse , which states “[n]o trustees shall be liable for any loss of damage which may happen to a trust fund… at any time from any cause whatsoever unless such loss shall be caused by his own fraud”. However, in the case of Alan there is more than a mere error of judgement and it is highly likely that his acts would be classed as:

1) Wilful deceit, in regards to the monies that were never transferred; and 2) Recklessness in regards to the monies that were taken from Go Ltd to pay for a yacht for his girlfriend This was confirmed in the case of Re City Equitable Fire Insurance Co as “either a consciousness of negligence or breach of duty, or a recklessness in the performance of a duty” . Therefore, the acts of Alan could not be limited by an exclusion clause.

Remedies:

There is a problem with this case, which is that the company is the trustee and each of its directors are to act personally . To follow on from this each of the trustees, as BuyIt will be a corporation trust for Go Ltd, as it is an industry association it must be assumed that BuyIT has capability in its Articles of Association. This means that one trustee (Director) cannot be liable for the actions of another unless they facilitated, by act or omission, the breach . This means that the company cannot be held in breach, only Alan unless it can be shown that the other trustees were put on notice . However, the indication is that this is not the case. This raises a problem in regards to receiving the monies from the administrators of BuyIt, because as BuyIt as a whole was not in breach there is no claim against the company. As the company acts as a trustee the dishonesty of Alan cannot be imputed to the other director’s in the company. This means that there is only a personal breach of Alan in the trust.

Rather, it must be against Alan personally for breach of trust. Alan is personally wealth then it may be the case that if all of the losses can be reclaimed in an action for personal breach of trust . However, as his wealth has depleted it may be that not all the monies can be recovered this way. Therefore, the remedy of tracing is available, as per Re Diplock . The case of Foskett v McKeown identified that tracing is not a remedy, but a process to identify the lost property. In the case of Go’s lost money the money transferred to buy the yacht is easy to trace , but as the yacht is destroyed then it is of no worth. This means that it may be the case that personal action against Alan is the only available option. However, according to Re Diplock it will be able to trace the money from Alan’s girlfriend as she benefited from the act, as well as she may have known of the act. If Fiona does know then she is as liable as Alan . It is possible that she did not know of the act; however as she received the gift and it can be traced back to Fiona. It is possible that an innocent third party can be approached to claim the lost funds, but it may only be limited to estates . Even so the case of Butler v Broadland and Re J Leslie Engineers Co Ltd have indicated this act may be extended to other fiduciary relationships, which there are indications that in the case of insolvency there would be strong case. This is because the money to claim from the trustee that has breached the trust, just like in the case of a deceased settlor, is no longer available. In this case it would be fair to pursue the innocent third party.

In the case of the monies it is mixed with that Buy It’s, which means that it may not be possible to trace as a mixed, as opposed to an unmixed account . However, it is identified that if mixed or not it must continue to exist unless it has been used to pay a debt or completely depleted . Therefore, as the company is bankrupt it is more than likely that the funds are now untraceable from BuyIt, which means that personal action is only available.

References:

1) Clemants and Abbass (2008) Complete Equity and Trusts: Texts Cases and Materials, OUP 2) Edwards & N. Stockwell (2002) Trusts and Equity, Longman 3) Edwards & N. Stockwell (2010) Equity and Trusts 9th Edition, Longman 4) Hayton & Mitchell (2005) Commentary and Cases on the Law of Trusts and Equitable Remedies 12th Edition, Sweet & Maxwell 5) Hudson, A (2009) Equity and Trusts 4th Ed, Routledge Cavendish 6) Burn and Virgo (2002) Maudsley & Burns Trust and Trustee, Case & Materials, 7th Ed, OUP 7) Law commission (1999) 7th Programme of reform No 259 8) Law Commission in Trustees’ Powers and Duties (Law Com, 1999, Report No. 260) 9) Moffat, G, Bean, Dewar (2005) Trusts Law: Texts and Materials 4th Ed. CUP 10) Pearce, Stevens & Barr (2010) The Law of Trusts and Equitable Obligations5th edition, OUP 11) Watt, G (2010) Equity and Trusts Directions 2nd Ed, OUP 12) Watt, G (2010) Equity and Trusts 4th Ed, OUP

Cases:

1) Milroy v Lord (1862) 4 De GF & J 264 2) Neville v Wilson [1997] Ch 144; 14-15; 3) Vandervell v IRC [1967] 2 AC 291 4) Walsh v Lonsdale [1882] 21 Ch D 14 5) Timpson’s Executers v Yerbury [1936] 1 KB 645 6) Firstpost Homes v Johnson [1995] 4 All ER 355 7) Grey v IRC [1960] AC 1 8) Grey v Oughtred [1960] AC 206 9) Re Rose [1952] 1 All ER 1217 10) Hunter v Moss [1994] 3 All ER 215 11) Speight v Gaunt (1883) 9 App Cas 1 12) Walker v Stones [2001] 2 WLR 623 13) Nestle v National Westminster Bank [2000] WTLR 795; cf 14) Armitage v Nurse (1998) Ch 241 15) Re City Equitable Fire Insurance Co [1925] Ch 40 16) Royal Brunei Airlines v Tan (1995 2 AC 378) 17) Brinks Ltd v Abu-Saleh (1995) WLR 1478 18) Styles v Guy (1849) 19 LT Ch 185 19) Target Holdings v Redfern [1995] UKHL 10; Jackson v Dickinson (1903) 1 Ch. 952 20) Re Diplock [1948] Ch. 465 21) Foskett v McKeown [2000] 3 All ER 97 22) Taylor v Plumer (1815) 3 M & S 562 23) Ministry of Health v Simpson [1951] AC 251 24) Banque Belge pour l’Etranger v Hambrouk [1921] 1 KB 321 25) Agip(Africa) v Jackson [1992] 4 All ER 385 26) Lipkin Gorman v Karpnale [1992] 4 All ER 512