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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

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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

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

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

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

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.

Bibliography

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Bently, L. and Sherman, B. (2004) Intellectual Property Law (2nd Edition) Oxford University Press, Oxford.

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Panesar, S. (2001) General Principles of Property Law (1st Edition) Pearson, UK.

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

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

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)

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

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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Jerold L Waltman, Minimum Wage Policy in Great Britain and the United States, 2007, Algora Publishing

John Fairhurst, Law of the European Union, 6th Edition, 2007, Pearson Education

Malcolm Sargeant and David Lewis, Employment Law, 4th Edition, 2008, Pearson Education

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)

United Kingdom v Council of the European Union (1997)

Wolstenholme v Post Office Ltd [2003] ICR 546

UK Statutes:

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

Labour Election Manifesto, New Labour: Because Britain Deserves Better, 1997, http://www.labour-party.org.uk/manifestos/1997/1997-labour-manifesto.shtml

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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.

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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

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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

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The Financial Ombudsman Service (“FOS”) is stated to be ‘The official independent expert in settling complaints between consumers and businesses providing financial services.’ It is a public body that was established by Parliament and is authorised to deal with a very broad range of complaints in areas ranging from banking and insurance, to loans, credit and hire purchase and savings and investments. The standard it applies when determining complaints, is what in the opinion of the ombudsman is fair and reasonable in all the circumstances of the case ; with the ability to award ‘fair’ compensation for loss or damage. Indeed, the FOS has come to enjoy a considerable reputation due to its efficiency, independence, and impartiality when dealing with complaints, dealing with almost a million enquiries, settling over 150,000 disputes a year, and settling a third of cases within three months. In fact, in the latest six-monthly (between 1st January and 30th June 2010) complaints data released on individual financial businesses, the FOS received 84,212 new complaints and upheld an average of 44% of complaints in favour of consumers.

The FOS has therefore demonstrated a strong complaints-handling performance with cases usually settled informally. Moreover, consumers are still free to reject a FOS decision and take their case to court instead if they so wish. Given such credentials, it might seem to be the case that consumers having complaints relating to insurance are well protected under the FOS regime. However, it is submitted that the draft Consumer Insurance (Disclosure & Representations) Bill (the “Bill”) recommended by the Law Commission (“LC”) is of significant practical benefit to consumers, and brings a great deal to the table in relation to insurance contracts. In fact, if enacted the Bill would represent a watershed in the law governing disclosure and representation in consumer insurance contracts. Inherent difficulties stem from the fact that this area of law is governed by archaic legislation in the form of the Marine Insurance Act 1906 (“MIA 1906”). The main difficulty is that the MIA 1906 stipulates that ‘A contract of marine insurance is a contract based upon the utmost good faith, and, if the utmost good faith be not observed by either party, the contract may be avoided by the other party.’

In fact, this principle of utmost good faith or ‘uberrimae fidei’ is of antiquated origin and imposes very strict disclosure requirements on the part of the assured to an insurance contract. Thus, the assured must disclose ‘every material circumstance which is known to the assured’ , with the assured being ‘deemed to know every circumstance which, in the ordinary course of business, ought to be known by him.’ Furthermore, material circumstance is expounded as including ‘Every circumstance is material which would influence the judgement of a prudent insurer in fixing the premium, or determining whether he will take the risk.’ The relevant test was elucidated upon further in Pan Atlantic Insurance Co Ltd & Another v Pine Top Insurance Co Ltd where the House of Lords held that the test of materiality of disclosure required any relevant circumstance to have had an effect on the mind of a prudent insurer in weighing up the risk, i.e. objective in nature. However, a certain degree of subjectivity was also attached to the test in that it was also held that an insurer would only be entitled to avoid an insurance policy if the material non-disclosure or misrepresentation had actually induced the making of the policy. Finally, every material representation made by the assured or his agent to the insurer prior to the making of a contract must be true or the insurer may also avoid the contract, even for honest mistakes leading to untrue material representations.

Consequently, if the assured fails to disclose all such material information the insurer may avoid the contract and refuse to pay out for any claim under the insurance contract. Thus, whilst this strict duty of disclosure may have been pertinent for commercial merchants at the turn of the twentieth century, it is difficult to justify the policy behind its continuation into a twenty-first century replete with a plethora of insurance contracts taken up by ordinary lay consumers. Its often harsh and unfair effects are exemplified by the case of Lambert v Co-operative Insurance Society Ltd. In Lambert, the Court of Appeal held that an insurer was entitled to avoid an insured’s policy on the basis that the insured had failed to inform the insurers that her husband held previous convictions, even though she had not been asked this. Nevertheless, the convictions were held to constitute material circumstances which should have been notified to the insurers under the ‘prudent insurer’ standard. Even whilst acknowledging the point in law proved by the defendants, the judge professed that they would be acting decently if they were to pay her nonetheless, even adding that ‘It might be thought a heartless thing if they did not, but that is their business, not mine.’

Even in 1975 one can see the excessive nature of the uberrimae fidei standard acting to the detriment of the innocent party. It is one thing for Parliament to set out insurance requirements precluding any misrepresentation at a time when the insurance market was in its infancy (following the Lloyd’s Act, 1871); it is quite another to continue to impose such draconian standards on millions of ordinary consumers a century later. Indeed, as recognised by the LC: ‘We think the time has now come to update the law to meet the needs of a different century’ ; with it identifying five main problems with the existing law. Firstly, it found that consumers were only able to obtain justice from the FOS and not from the courts, as the courts were forced to apply the unfair rules. Moreover, the LC stated that the compulsory jurisdiction of the FOS was limited to awards of ?100,000. This effectively sets a dual standard depending on whether the consumer is rich or not, with those individuals insured for figures in excess of ?100,000 (e.g. buildings or life insurance) forced to take their chances in courts with much stricter standards. The LC noted the FOS would decline to hear cases which required cross-examination of witnesses, so cases venturing into complex areas or involving third parties again ostracised consumers.

Secondly, the LC considered the current rules were ‘unacceptably confused’, with many consumers not realising a right to complain to the FOS, and with the ‘resulting muddle leading to a loss of confidence in the insurance industry’. Thirdly, the LC believed the legal system penalised some vulnerable groups and cited problems experienced by older individuals, those with criminal convictions , or even those with Multiple Sclerosis (owing to early but undiagnosed symptoms leading to a rejection of critical illness insurance claims). Fourthly, the LC believed the system imposed an inappropriate role on regulators, as the FOS and Financial Services Authority were forced to effectively act as policy and rule-makers. Additionally, the courts were systematically forced to reach unfair decisions. Finally, in the face of across-the-board European Union harmonisation, it stated that it was ‘difficult to justify the present incoherent layers of law to an international audience.’

The LC’s recommendation for reform of the onerous legal position ‘in which the strict letter of the law had been overlain by successive layers of self-regulation, FSA rules and FOS guidelines’ , took the form of the recommended enactment of the Bill. Under the Bill, a consumer insurance contract (“CIC”) is defined as one entered into ‘…by an individual wholly or mainly for purposes unrelated to the individual’s trade, business or profession’. The Bill replaces the duty of utmost good faith by instead stipulating that: ‘It is the duty of the consumer to take reasonable care not to make a misrepresentation to the insurer’ in any disclosures or representations made by the consumer to an insurer prior to entering into, or varying, a CIC. ‘Reasonable care’ is said to be determinable ‘…in the light of all the relevant circumstances.’ This includes things such as ‘the type of consumer insurance policy in question, and its target market’ ; the insured’s produced or authorised explanatory materials or publicity ; the clarity and specificity of the insurer’s questions ; and ‘whether or not an agent was acting for the consumer.’ Also the Bill, prevents contracting out of these obligations by putting the consumer in a worse position , or the use of ‘basis of the contract’ clauses, namely clauses which convert consumer representations into warranties, breach of which automatically terminates insurance cover.

The Bill also provides for balanced insurers’ remedies for different types of misrepresentations. For example, an honest and reasonable misrepresentation by the assured does not affect the validity of the insurance contract whereas a deliberate or reckless qualifying misrepresentation allows the insurer to avoid the contract, refuse any claim and keep any premiums paid (unless good reasons exist why they should not be kept). However, the insurer’s remedies for any careless representations are based on what the insurer would have done if the consumer had complied with the reasonable care duty. This ranges from avoiding the contract to proportionate reduction of a claim (because the insurer would have charged a higher premium). Although widely accepted, the proposed reforms are not without criticism. For example Soyer has argued that the reasonable assured test for materiality is nebulous and has not been previously tested; that the availability of ‘proportionate’ remedies may lead to uncertainty as well as being open to criticism from theoretical and economic perspectives; and that statutory control is not practical and undesirable.

Nevertheless, it is submitted that such criticisms are weak in the face of the currently manifestly unfair application of dated insurance law principles which are adversely affecting consumers. The law is clearly in need of reform and the proposals set out in the Bill clearly represent a fairer, more balanced and transparent process relating to consumer insurance contracts. Butcher has even suggested that ‘…to talk of insurance contracts as being contracts of good faith tends to be either useless or positively harmful to a coherent development of the law.’ He considers good faith to be a redundant concept, with rules now in place which have gone a good deal further than necessary to maintain good faith relations, and which have provided insurers with a weapon which produces the opposite results of what good faith would demand. Whilst it is true that the service provided by the FOS is currently invaluable to thousands of insurance consumers across the UK, it cannot be a viable substitute for properly focused and balanced reforms. The Bill achieves this and it is submitted there is no reason to delay its enactment.

Bibliography

Achampong, F. (1987) ‘Uberrimae fides in English and American insurance law: a comparative analysis.’ I.C.L.Q., 36(2), 329-347.

Bennett, H.N. (1993) ‘The duty to disclose in insurance law.’ L.Q.R., 109(Oct), 513-518.

Butcher, C. (2008) ‘Good faith in insurance law: a redundant concept?’ J.B.L., 5, 375-384.

Hird, N. (1998) ‘How to make a drama out of a crisis.’ J.B.L., May, 279-287.

Soyer, B. (2008) ‘Reforming the assured’s pre-contractual duty of utmost good faith in insurance contracts for consumers: are the Law Commissions on the right track?’ J.B.L., 5, 385-414.

Soyer, B. (2009) ‘Reforming pre-contractual information duties in business insurance contracts – one reform too many?’ J.B.L., 1, 15-43.

Steyn, J. (1992) ‘The role of good faith and fair dealing in contract law: a hair-shirt philosophy?’ Arbitration, 58(1), 51-56.

Tarr, Julie-Anne and Tarr, A.A. (2001) ‘The insured’s non-disclosure in the formation of insurance contracts: a comparative perspective.’ I.C.L.Q., 50(3), 577-612.

The Financial Ombudsman Service (2010a) [Online] Available from: http://www.financial-ombudsman.org.uk/. [Accessed 1st December 2010].

The Financial Ombudsman Service (2010b) ‘About us.’ [Online] Available from: http://www.financial-ombudsman.org.uk/about/index.html. [Accessed 2nd December 2010].

The Financial Ombudsman Service (2010c) ‘ombudsman releases latest complaints data on individual financial businesses.’ (14th September) [Online] Available from: http://www.financial-ombudsman.org.uk/news/updates/complaints-data-Sept-10.html. [Accessed 2nd December 2010].

The Law Commission (2009) Consumer Insurance Law: Pre-Contract Disclosure and Misrepresentation. Law Com No 319, Cm 7758, SG/2009/255 (December).

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Introduction

The European Court of Justice (ECJ) devised the direct effect doctrine to give international treaties EU legal effect. The doctrine permits individuals to rely on European law in proceedings taken against EU Member States. This paper discusses selected direct effect cases decided since the seminal ECJ Van Gend en Loos decision to highlight persistent direct effect ambiguities and contradictions. Suggested law reforms are also provided in the Conclusion.

Historical Background

In Van Gend en Loos, the ECJ determined it did not have jurisdiction to decide whether international law can override domestic law. The Treaty was only intended for interstate compliance; direct effect is contrary to such intention. The ECJ decided that EU treaties must promote a ‘community not only of states but also of persons, [requiring] participation of all persons,’ with ‘community law [intended] to confer upon individuals any rights which form part of their legal heritage.’ In Van Gend en Loos, the ECJ explains direct effect principles as (i) subject measure must be clear; (ii) unconditional; (iii) require no additional implementation measures; (iv), State or institutional discretion is not permitted. Directives may have vertical or horizontal effect. Vertical direct effect permits enforcement against a Member State, where horizontal effect is individual citizen enforcement against another.

There have been contradictory applications of both the horizontal and vertical direct effect. In Van Duyn, the ECJ found direct effect where the State obligations were sufficiently clear to assessed by a court. In contrast, Ratti provided that a similar directive only operated directly when the implementation date had passed; ‘indirect effect’ applied to bypass this outcome. Regulations also may have horizontal and direct effects. Their implementation date does not hinder their operation, as Article 288 provides regulations have (i) general application, as (ii) binding and directly applicable in all Member States. This approach is confirmed in Commission v Italy, where regulations were not to be subject to additional implementation requirements.

Ambiguous Application of the Doctrine

The issue of the legality of horizontal direct effects has attempted to be bypassed in various cases. In Von Colson, the ECJ avoided it by finding that domestic law should be interpreted ‘harmoniously with’ international law, or as close as reasonably practicable. If application of the law would lead to the substantially the same Directive outcome, the ECJ will look at whether the horizontal direct effect should be allowed, and labelled this the ‘indirect effect.’ This idea was supported in later cases, for example in Marleasing, where the ECJ decided that domestic laws enacted before or after the Directive would nevertheless require implementation, even if national law does not relate to the Directive and is not enacted to specifically implement it.

The doctrine also allows remedies for individuals in situations where a State has not appropriately implemented laws to properly reflect the Directive as the EU intended it to be applied. It is the responsibility of the Member State to certify that its institutions, authorities and court systems are following the rules of the Directive, therefore domestic courts can be sure the laws are applied to reflect their intended meaning. Discerning the ‘intended meaning’ is difficult, as the ECJ often will not recognise a horizontal effect expressly, only impliedly by permitting a ruling to bypass the intention of the Directive by overriding the conflicting domestic legislation. This means a Directive can disapply a domestic law, permitted in CIA Securities v Signalson, where particular provisions in Belgium were found invalid as they did not properly follow the Directive.

Conflicting Judicial Approaches

The ECJ has creatively used methods to either ensure the doctrine can be applied. For instance, in the Foster case, the court formulated a ‘reverse vicarious liability’ decision. This was used to find subsidiaries of the Member State responsible for failures of the domestic legislature, which becomes confusing given that at the same time, a private citizen also does not influence the implementation of a Directive but cannot be found liable. Contrastingly, in Ratti, the ECJ applied estoppel to hold a State liable and obliged to give effect to the Directive appropriately, because if this does not occur, citizens cannot rely on it at a domestic level. The State which does not correctly give effect to it is committing an equitable wrong against individuals. Complications also become evident in Marshall and Defrenne (No 2). In Marshall, the ECJ held a Directive only bind Member States, and invalidated any horizontal direct effect. However, in Defrenne, it held that Article 157, directed at Member States, could also be applied horizontally against individuals.

As mentioned, the Van Duyn case caused ambiguity as the ECJ found that Article 45 could be directly effective yet did not meet the requirement of being unconditional, because the power of the Member States was regulated judicial control. However, since no treaty has ever been found to not be regulated by judicial control, the Van Duyn case therefore removed the limitation of unconditionality. The second requirement of clarity was applied flexibly in Defrenne (No 2), as the court held that Article 157 was directly effective due to its dual meaning, the first being a general interpretation based on a ‘mere aspiration’ of gender equality, the second being a specific restriction disallowing unequal remuneration in the workforce.

The ruling in Marshall has caused the most controversy in recent times, as the court held that Directives will only have a direct effect on Member States and not in litigation between private individuals. However, the ECJ then used various methods to avoid its own ruling, allowing Directives to have a de facto effect with the same outcome. Additionally, the ECJ interprets ‘Member States’ inconsistently to allow them to be subject to vertically effective Directives in some situations and not others. This was shown in Foster v British Gas, where the court held an authority ‘in any legal form’ with the duty of providing any public service ‘under control of the State’ held powers beyond regular rules imposed on individuals and hence would be bound by unimplemented Directives.

Recent Commentary

Developing from the original restrictions imposed in Van Gend en Loos, various approaches have been adopted by the courts. Academic commentary posits that European law must become less influential and permit domestic courts to have more discretion in the event of conflicting national law, especially if the provisions in question are from local constitutions. To begin, there are established criteria to be met before any EU legislative provision can take a direct effect, which is carried forward from the original decision in Van Gend en Loos. The second point developed from the Marshall case it that the Directives can only legally have a vertical direct effect; the horizontal effect is allowed impliedly on some occasions. Problematically, legislation in Member States do not contain any guiding regulations on these limitations, possibly due to the ongoing inconsistent approach taken by the ECJ. However it should be noted that the first type of restriction has been flexibly applied recently and the Van Gend en Loos principles are less strict, while still broadly applied.

Considering the doctrine beyond the level of Member States has also led to inconsistencies with application to individual citizens. For example, obligations are often imposed to restrict individuals through use of the de facto horizontal direct effect, such as free-market regulations, although these were never intended by parliament apply to private individuals. The case of Alemo-Herron outlined this problem, where the ECJ addressed a Directive on transferring of undertakings contained in Article 16 of the Charter which permits free formulation of contracts while conducting business. The interpretation under international law overruled that of the domestic application of contractual freedom Academics say this unfair application should be avoided, and greater domestic judicial discretion permitted by mandating a margin to favour local courts who are applying the EU law if the international application will adversely affect fundamental rights.

Conclusion

The ECJ doctrine of direct effect has applied inconsistently and ambiguously at various times by the Court. These inconsistencies have led to the doctrine being legitimately critiqued as a political tool to strengthen the power of European Union laws over sovereignty in the domestic sphere. It has led to ongoing problems within the judicial system deriving from the criteria of Van Gend en Loos, which saw the ECJ bypass specific discussions by State Representatives stating they did not intend for the Treaty to be distinguished from other international treaties, and did not accept that it should provide rights to citizens to enforce at a domestic level either.

There is now apparent ongoing ECJ application of de facto rules that conflict with national legislation, where inconsistent circumventions sanctioned by the ECJ do not uphold the objective of international courts to prevent application of a horizontal effect. By removing the original restrictions on the doctrine, the local court system may be given more discretion to apply provisions fairly between individuals and Member States, and a flexible approach will allow the doctrine to be used for the benefit of both individuals and organisations seeking effective enforcement.

Cases

CIA Security International SA v Signalson SA and Securitel Sprl [1996] ECR 1-2202.

Costa v. E.N.E.L. [1964] ECR 1141.

Defrenne v Sabena (No 2) [1976] ECR 455

Foster and Others v British Gas plc [1990] ECR I-3313.

Francovich and Bonifaci v Italy [1991] ECR I-5357.

Marshall v Southampton and South-West Hampshire Area Health Authority (Teaching) [1986] ECR 723

NV Algemene Transporten Expeditie Onderneming van Gend en Loos v Nederlandse Administratie der Belastingen [1963] ECR 1.

Publico Ministero v Tullio Ratti [1979] ECR 1629.

Van Duyn v Home Office [1974] ECR 1337.

Von Colson and Kamann v Land Nordrhein-Westfalen [1984] ECR 1891.

References

Betlem, G. ‘The principle of indirect effect of community law,’ ERPL, 1995, Vol. 3, Issue 1.

Betlem, G. and Nolkaemper, A. ‘Giving Effect to Public International Law and European Community Law before Domestic Courts. A Comparative Analysis of the Practice of Consistent Interpretation,’ European Journal of International Law, 2003, Vol. 14.

Chalmers, D., Davies, G. and Monti, G. European Union Law (2nd ed., Cambridge University Press: 2010).

Craig, P. and de Burca, G. European Union Law: Text, Cases, and Materials (5th ed., Oxford University Press: 2011).

Mastroianni, R. ‘On the distinction between vertical and horizontal direct effect of derivatives: what role for the principle of equality?’, 1999, EPL, Vol. 5, pp. 417-38.

Nolkaemper, A. ‘Revisiting Van Gend En Loos,’ Jean Monnet Working Paper 06/14, New York School of Law, 2014, available online at: http://www.jeanmonnetprogram.org/papers/14/documents/JMWP06Nollkaemper.pdf

Robin-Olivier, S. ‘The evolution of direct effect in the EU: Stocktaking, problems, projections,’ International Journal of Constitutional Law, 2014, Vol. 12, Issue 1, pp. 165-188, available online at: http://icon.oxfordjournals.org/content/12/1/165.full

Sebba, I. ‘The Doctrine of ‘Direct Effect: A Malignant Disease of Community Law.’ Legal Issues of Economic Integration, 1995, Vol. 22, Issue 2, pp. 35–58.

Footnotes
Ilan Sebba, ‘The Doctrine of ‘Direct Effect: A Malignant Disease of Community Law.’ Legal Issues of Economic Integration, Vol. 22, Issue 2, 1995, p. 35.
Van Gend en Loos, above n 2.
Ibid, at [20].
Ibid, at [21].
NV Algemene Transporten Expeditie Onderneming van Gend en Loos v Nederlandse Administratie der Belastingen (‘Van Gend en Loos’) [1963] ECR 1.
Gerrit Betlem & Andre Nollkaemper, ‘Giving Effect to Public International Law and European Community Law before Domestic Courts. A Comparative Analysis of the Practice of Consistent Interpretation,’ European Journal of International Law, 2003, Vol. 14, p. 569.
Van Duyn v Home Office [1974] ECR 1337.
Publico Ministero v Tullio Ratti [1979] ECR 1629, at para. 23.
Treaty on the Functioning of the European Union (TFEU), Article 288.
Commission v Italy [1973] ECR 101, at para. 17.
Von Colson and Kamann v Land Nordrhein-Westfalen [1984] ECR 1891.
R. Mastroianni, ‘On the distinction between vertical and horizontal direct effect of derivatives: what role for the principle of equality?’, EPL, 1999, Vol. 5, p. 417.
Marleasing SA v La Commercial de Alimentacion SA [1990] ECR 1-4135
Von Colson, above n 8, at [3].
G. Betlem. ‘The principle of indirect effect of community law’, 1995, ERPL, Vol. 3, No. 1.
CIA Security International SA v Signalson SA and Securitel Sprl [1996] ECR 1-2202.
Foster and Others v British Gas plc [1990] ECR I-3313.
Ibid.
Publico Ministero v Tullio Ratti [1979] ECR 1629, at para. 23.
Marshall v Southampton and South-West Hampshire Area Health Authority (Teaching) [1986] ECR 723.
Defrenne v Sabena (No 2) [1976] ECR 455.
Van Duyn, above n 8.
Ibid.
Defrenne, above n 22.
Marshall, above n 21.
Sophie Robin-Olivier, ‘The evolution of direct effect in the EU: Stocktaking, problems, projections,’ International Journal of Constitutional Law, 2014, Vol. 12, Issue 1, available online at: http://icon.oxfordjournals.org/content/12/1/165.full
Foster, above 18.
Paul Craig and Grainne de Burca, EU Law: Text, Cases, and Materials (5th edition: Oxford University Press: 2011), p. 188.
Van Gend en Loos, above n 2.
Marshall, above n 21.
Robin-Oliver, above n 26.
Ibid.
Case C-426/11 Alemo-Herron and others, July 18, 2013, unreported.
Directive 2001/23 of March 12, 2001: approximation of the laws of the Member States relating to the safeguarding of employees’ rights in the event of transfers of undertakings, businesses or parts of undertakings or businesses, 2001 O.J. (L 016).
Damian Chalmers, Gareth Davies and Giorgio Monti, European Union Law (2nd ed., Cambridge University Press: 2010), p. 288.
Andre Nolkaemper, ‘Revisiting Van Gend En Loos’, Jean Monnet Working Paper 06/14, New York School of Law, 2014, available online at: http://www.jeanmonnetprogram.org/papers/14/documents/JMWP06Nollkaemper.pdf, p. 5.
Ibid, p. 6.

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

A. Maria Haines has recently converted to the muslim faith and has now insisted on wearing the appropriate religious dress which requires Maria to wear clothing revealing only her eyes. Customers have refused to deal with her – Maria is the sole Receptionist as BIS and they have told her that they will have to terminate her contract.

If BIS decides to terminate Maria’s contract, then it is likely that she will commence proceeding against BIS for unfair dismissal, pursuant to section 94(1) of the Employment Rights Act 1996 (as amended). It is likely that the primary basis for her claim will be that her right to freedom of religion, under Article 9 of the Human Rights Act 1998, has been infringed by her employer’s decision to dismiss her for wearing her religious head veil. Article 9(1) of this Act provides that, “Everyone has the right to freedom of thought, conscience and religion; this right includes freedom to change his religion or belief and freedom, either alone or in community with others and in public or private, to manifest his religion or belief, in worship, teaching, practice and observance.” (Art. 9(1) HRA 1998) Maria will likely argue that in wearing a veil she is publically manifesting her religion in practice and observance. She may even try to rely upon the recent House of Lords decision in the case of R (Begum) v Governors of Denbigh High School [2006] UKHL 15 to support this argument. By virtue of section 98(1) of the Employment Rights Act 1996, the burden of proof will rest upon BIS to satisfy the Tribunal, on the balance of probabilities, that the dismissal was not unfair.

Maria may also argue that BIS has unlawfully discriminated against her on grounds of her religion and belief, in accordance with regulation 3 of the Employment Equality (Religion or Belief) Regulations 2003. Her argument would likely be that, in dismissing her, BIS treated her “less favourably than [it] treats or would treat other persons.” (Reg. 3(1)(a) EE(RoB)R 2003)

There are several aspects to this claim which present opportunities for BIS to mount a successful defence to these claims: The first argument that BIS might make is that the dismissal in question was not unfair, because the reason for her dismissal “relates to [her] capability… for performing work of the kind which [she] was employed by BIS to do.” (s.98(2)(a) ERA 1996) There is clear evidence here that Maria could not continue as receptionist, because BIS’s customers refused to have any further dealings with her, due to her insistence on covering her face with a religious veil.

BIS can argue that Maria’s rights under Article 9(1) of the Human Rights Act 1998 are not absolute because they are qualified by Article 9(2) of that same Act, which provides that, “Freedom to manifest one’s religion or beliefs shall be subject only to such limitations as are prescribed by law and are necessary in a democratic society in the interests of public safety, for the protection of public order, health or morals, or for the protection of the rights and freedoms of others.” (Art. 9(2) HRA 1998) BIS can argue that its right to run an effective business is one of the rights against which Article 9 must be weighed and that this latter right must prevail. There is recent and good judicial authority for this proposition; namely, in the case of Copsey v WWB Devon Clays Ltd [2005] EWCA Civ 932 which applied the earlier case of Stedman v United Kingdom (1997) 23 E.H.R.R. CD 168.

Maria might try to rebut this argument and distinguish these authorities on the basis that, in those cases, the employees in question refused to accept offers of alternative employment, although the success of this argument will depend upon whether or not it was viable for BIS to make such an offer in this case. In light of the fact that BIS is only a small company, it may well be the case that there did not, at the time of dismissal, exist any other vacancies for which Maria would have been suitably qualified.

BIS might also try to argue, in light of the fact that Maria has only recently converted to Islam, that her religious beliefs are not sufficiently cogent, serious or important to warrant her reliance on Article 9 of the Human Rights Act 1998; while the success of this argument will fall on the Courts interpretation of the facts, there is judicial authority, at least at the European level, that lack of real or strong religious belief precludes the operation of Article 9 of the European Convention on Human Rights 1950 (Campbell and Cosans v United Kingdom (1982) 4 EHRR 293). A similar argument to this that BIS might try to rely upon is that Maria, in wearing a head veil, was not manifesting her religious beliefs, but was merely motivated to wear religious dress by those beliefs; again, there is judicial authority at the European level to support the validity of this argument (Arrowsmith v UK (1978) 3 EHRR 218).

BIS can distinguish the decision handed down by the House of Lords in the case of R (Begum) v Governors of Denbigh High School [2006] UKHL 15 on the basis that this case concerned the treatment of a student in compulsory full-time education. Both Brooke LJ and Mummery LJ both explicitly declared in this case that the principles in operation were not the same as those applicable in the employment context (Sandberg, 2009:272).

In regard to the argument that BIS’s dismissal constitutes discrimination under regulation 3 of the Employment Equality (Religion or Belief) Regulations 2003: BIS can argue that, in light of the reaction of its customers to Maria’s head veil, requiring her to remove the veil during working hours became a genuine and proportionate occupational requirement, in accordance with regulation 7(2) of the 2003 Regulations (Nairns, 2007:93).

In conclusion, so long as BIS can satisfy the Court that it was not in a position to be able to offer Maria any alternative employment, where she would have been able to continue wearing her religious dress, then it is highly unlikely that any of Maria’s claims will be successful.

B. Josie Rimson has been employed in BIS cafeteria to prepare staff meats. She has noticed that some of the meats and sauces are out of date, but, having raised the issue, was told: “Your job is to make the meals, just get on with it”. She has now heard that some staff are off sick with suspected food poisoning and she is afraid she will be blamed. Repeated complaints to Senior Managers at BIS have been rejected – so now she has reported the problem to Bramley Council. An item on the matter has now appeared in the Bramley Gazette. BIS has decided to discipline her, and have warned that she may be dismissed.

The main issue here is whether or not a dismissal of Josie by BIS would be deemed unfair under the Employment Rights Act 1996, as amended by the Public Interest Disclosure Act 1998, an Act which inserted into the 1996 Act clause 103A, which provides that, “An employee who is dismissed shall be regarded for the purposes of this Part as unfairly dismissed if the reason (or, if more than one, the principal reason) for the dismissal is that the employee made a protected disclosure.” (s. 103A ERA 1996; s. 5 PIDA 1998)

The term ‘protected disclosure’ is defined by sections 43A and 43B of the Employment Rights Act 1996 (as amended) as, “…any disclosure of information which, in the reasonable belief of the worker making the disclosure, tends to show one or more of the following— (…) (b) that a person has failed, is failing or is likely to fail to comply with any legal obligation to which he is subject, (…) (d) that the health or safety of any individual has been, is being or is likely to be endangered (…) (f) that information tending to show any matter falling within any one of the preceding paragraphs has been, is being or is likely to be deliberately concealed.” (s. 43A & 43B ERA 1996)

In the present case, it is reasonably clear, on the facts, that the reason Josie reported this matter to the Bramley Gazette was because she felt that her Senior Managers were trying to conceal or, at least, disregard the possibility that the instances of staff poisoning were the result of their consuming out of date food in the staff canteen, in which case section 43B(f) of the Employments Rights Act 1996 would likely be deemed satisfied. It may also be the case that Josie felt, in light of the despondence of BIS’s senior managers, that unless she reported this incident to the Bramley Gazette, the events giving rise to these incidences of food poisoning would repeat themselves in the future, in which case section 43B(d) of the Employments Rights Act 1996 would likely be deemed satisfied. If the Tribunal is satisfied (1) that Josie ‘reasonably believed’ that there had been malpractice on the part of her Senior Managers (Babula v Waltham Forest College [2007] EWCA Civ 174); and, (2) that Josie’s disclosure was the reason for her dismissal (Kuzel v Roche Products Ltd [2008] EWCA Civ 380), then it is highly likely that Josie will be able to bring a successful claim against BIS for unfair dismissal.

BIS might try to argue that Josie is being dismissed for gross negligence, in preparing staff meals using foods which were out of date , and that when the Senior Managers told her “Your job is to make the meals, just get on with it,” they were merely reminding her that it is within her job capacity to make decisions in regard to which food stuffs to use and which to discard. While this argument might have had some merit if Josie’s Senior Managers had commenced disciplinary proceedings after Josie admitted that the recent outbreak of food poisoning was potentially attributable to her having served out of date food stuffs in the staff canteen, the fact that such proceedings were only initiated after the article was published in the Bramley Gazette, renders this version of events highly improbable.

C. Harriet Jameson has recently returned from sick leave following a serious car accident, which required her to have extensive surgery for major facial injuries. The surgery left her with very visible red scarring on her face. BIS has interviewed her and suggested removing her from her post as Manager of the company creche because the children of the employees have refused to attend: they have been having nightmares, and this is affecting attendance of the female employees at work. Harriet has refused her relocation to the personnel Department, claiming discrimination.

The main issue which falls for determination here is whether or not Harriet, if dismissed from her position as Manager of the company creche, will be able to mount a successful claim against BIS for unfair dismissal.

We have been told that Harriet is claiming that she is being discriminated against on the basis of her facial disfigurement. However, in order for this argument to have legal validity, it is necessary that Harriet can satisfy the Tribunal that her facial scarring qualifies her for protection under the Disability Discrimination Act 1995.

For the purposes of this Act, a ‘person with disability’ is defined as follows: “… a person has a disability for the purposes of this Act if he has a physical or mental impairment which has a substantial and long-term adverse effect on his ability to carry out normal day-to-day activities.” (s. 1(1) DDA 1995)

While there is no doubt that Harriet’s purported disability is physical in nature, in order for her to argue that it is a qualifying impairment, she must satisfy the Tribunal that it is having substantial adverse effects, that those substantial adverse effects will likely remain for the long-term and that they affect her ability to carry out normal day-to-day functions or activities (Department for Work and Pensions, 2005:3).

The Guidance issued by the Secretary of State on the definition of disability, pursuant to section 3 of the Disability Discrimination Act 1995 confirms that, with some limited exceptions (e.g. for self-inflicted scarring, piercing or tattoos), bodily scarring or disfigurement will be deemed to have substantial adverse effects on a person’s ability to undertake normal day-to-day activities (Department for Work and Pensions, 2005:6; Adams, 2008:375). To satisfy the ‘long-term’ criterion of the 1995 Act, the scarring must either have been present for 12 months or be likely to remain for that period (Adams, 2008:375). In this present case, while the surgery was only recent, it seems likely, due to its severity, that the scarring will remain for at least this length of time.

Having established that Harriet qualified for protection under the Disability Discrimination Act 1995, it is now necessary to consider whether or not she has been discriminated against on the basis of her disability. ‘Discrimination’ is defined by section 5 of the 1995 Act: “For the purposes of this Part, an employer discriminates against a disabled person if— (a) for a reason which relates to the disabled person’s disability, he treats him less favourably than he treats or would treat others to whom that reason does not or would not apply; and (b) he cannot show that the treatment in question is justified.” (s. 5(1) DDA 1995).

While it is certainly the case that BIS has asked Harriet to accept a lateral move on the basis of her disability, BIS will seek to show that this did not constitute discrimination because it was not appropriate for her to remain working with children, in light of the effect that her disfigurement has had on them, in practice. In the opinion of this author, BIS has acted reasonably and proportionately in asking Harriet to relinquish her role as Manager of the company creche and to accept an alternative employment position in the company. As Adams (2008:367) argues, albeit in a slightly different context, “An employer… may be justified in refusing to employ as a model for cosmetics someone who suffers from a disfiguring scarring…”

In conclusion, if Harriet refuses to accept BIS’s offer of alternative employment, BIS will be entitled to terminate her contract, without fear of any legal repercussions under the Employment Rights Act 1996 or the Disability Discrimination Act 1995.

References/ Bibliography

The Employment Rights Act 1996.

The Employment Rights Act 2002.

The Employment Equality (Religion or Belief) Regulations 2003.

Stedman v United Kingdom (1997) 23 E.H.R.R. CD 168.

The Human Rights Act 1998.

Copsey v WWB Devon Clays Ltd [2005] EWCA Civ 932.

The European Convention on Human Rights 1950.

Campbell and Cosans v United Kingdom (1982) 4 EHRR 293.

Arrowsmith v UK (1978) 3 EHRR 218.

R (Begum) v Governors of Denbigh High School [2006] UKHL 15.

Sandberg, R., 2009. The Changing Position of Religious Minorities in English Law: The Legacy of Begum. In RD Grillo (ed.), Legal Practice and Cultural Diversity, Ch. 14. Aldershot: Ashgate Publishing Limited.

Nairns, J., 2007. Employment law for business students. 3rd edition. London: Pearson Education Publishing.

The Public Interest Disclosure Act 1998.

Babula v Waltham Forest College [2007] EWCA Civ 174.

The Disability Discrimination Act 1995.

Kuzel v Roche Products Ltd [2008] EWCA Civ 380.

Department for Work and Pensions, 2005. Disability Discrimination Act consultation document: guidance on matters to be taken into account in determining questions relating to the definition of disability. London: The Stationary Office.

Adams, A., (2008). Law for business students. 5th edition. London: Pearson Education Publishing.