Easements: more than a walk in the park

the-mansion
Elham House, Broome Park Estate, near Canterbury
by Jessamy/Whiskers

Regency Villas v Diamond Resorts

[2017] EWCA Civ 238

Easements 2.0: updated for the twenty first century, courtesy of our new Chancellor of the High Court, Vos C.  The case has slightly unusual circumstances.  Elham House is the manor in the middle of the Broome Park Estate outside Canterbury. Former owners include everyone’s favourite First World War Lord, Lord Kitchener. 

Like many houses who have outlived their privileged place in society, Elham House has been forced to reinvent itself.  It is now a golf course and sports club.  In the grounds are a number of chalets (I can hear Lord Kitchener shuddering in distate), in which people have time shares. 

The timesharers – “Regency Villas” – had been asked to pay an increased fee for the enjoyment of the various facilities including 18-hole golf course, 3 squash courts, 2 outdoor hard-surfaced tennis courts, a putting green and a croquet lawn as well as extensive grounds and an Italianate Garden. 

So this was basically all about money, and how much the time sharers should contribute to upkeep.  The owners of the golf club etc., held that the rights the timesharers held were personal rights, and therefore could be withdrawn, whilst the timesharers claimed the uses as easements. 

So pretty particular facts to the case, but it gives us a far wider definition of what can form an easement than we had before. 

Judges have always recognised that easements must move with the times.

“The category of servitudes and easements must alter and expand with the changes that take place in the circumstances of mankind.”

said Lord St Leonards in 1852.

But Brougham LC cautioned against it getting silly:

“It must not therefore be supposed that incidents of a novel kind can be devised and attached to property at the fancy or caprice of any owner.”

So is the right to use squash courts, tennis courts, an 18 hole golf course and a swimming pool capricious and fanciful? Sir Geoffrey was certainly keeping a straight face. I’m not quite sure that his nineteenth century predecessors would have though. Re Ellenborough Park had established that recreational rights could be easements, but this was taking recreation to a whole new level.

Vos’ Weltanschauung (“world view”) means that the learned judge should check his entitlement. In Vos-land, houses routinely have swimming pools and tennis courts, and we are all familiar with how expensive it is to maintain a decent golf green, aren’t we chaps? Also, I wonder whether how many of the population of “somewhere”, rather than VosWelt, would necessarily agree with his words:

[54]: “…Physical exercise is now regarded by most people in the United Kingdom as  either  an essential or at least a desirable part of their daily routines.  It is not a mere recreation or amusement.  Physical exercise can, moreover, in our modern lives, take   many forms, whether it be walking, swimming or playing active games and sports. We cannot see how an easement could … be ruled out solely on the grounds that the form of physical exercise it envisaged was a game or a sport rather than purely a walk in a garden.”

A lot of things to think about in this case, and expect some chunky articles in Jessamy’s favourite comic, The Conveyancer.  For those unhappy souls sitting land law or conveyancing exams, dazzle your tormentors by referring to this shiny new case. 

Of Ball Grabs, stoats and weasels

 by whiskers

First Subsea v Balltec
[2017] EWHC 866 (Ch)


This is a story about ball-grabs. It also contains a serious warning for company directors: dishonest breaches of their fiduciary duty do not attract Limitation Act forbearance.

Ball-grabs are not cognates of POTUS-grabs. They are a clever idea for making underwater oil pipes less leaky. If you want an illustration of the brilliance of this device, you will find a diagram at the end of the first instance case report.

Ball-grabs were invented by Mr Emmett. Mr Emmett had birthed the ball-grab early on his career. His company, BSW Engineering had employed a small and cohesive workforce of six. If you wanted a Silicon Valley analogy, it would be set in a garage, with a basket ball hoop on the wall, and Mr Emmett would be played by Matt Damon wearing glasses and trying to look intelligent. Norris J, at first instance, clearly warmed to Bob Emmett and his ball-grabbing obsessions. He describes him thus:

Mr Emmett was a passionate engineer with unbounded enthusiasm for the technology he created and a deep loyalty towards those who had helped him develop it and market its products.

Sir Alastair took less kindly to the Claimants. He described one of them as an “abrasive” witness. For Emmett, had like poor Mr Toad, given the keys of his beloved firm to Toad Hall to the Stoats & Weasels. Needing extra investment to develop his ball-grabbers, he had sold a 71% stake to a rather unpleasant and corporate outfit in Aberdeen. This was not going to end well. The entrepreneurial spirit of the Garage was never going to gel with the sort of outfit that had HR departments, health and safety policies and zero talent in management of the free-spirited.

Mr Toad remained a director of the company, but was more and more excluded from everything. At the end, even the premises of the company. He had responded badly to the Stoats & Weasels sacking his best friend, Mole, and funded his best friend’s claim through the Employment Tribunal. Mole won, and that can’t have pleased the Stoats & Weasels one bit.

Mr Toad took against the libertine ways of the Stoats & Weasels- imposed Managing Director. He was the sort of man downloads porn onto receptionists’ computers for grins. The sort of man who lacks passion for ball-grabbing, but considerable enthusiasm for other types of grab.

And so, lacking a Badger to come to his aid and cleanse the Augean Stables, poor Toad started a new company in Ratty’s hole on the riverbank, with his old friends. Unfortunately, he did this when still officially a director. The gang tendered for three contracts to build ball-grabbers for Angolans. They won one of the tenders, and whilst losing the other two, forced the Stoats & Weasels to lower their tender price, thereby causing loss to Toad Hall.

Oh dear, poor Mr Toad. After a twenty four day trial, in which Stoats & Weasels threw everything at him and his nascent company; after a judgment of 487 paragraphs, Mr Toad defeated all the claims of the Stoats & Weasels. Except the claim for breach of fiduciary duty.

But his brief, 1 Essex Court’s, David Cavender, gave it one last shot: the Limitation Act. Mr Toad is out of clink, because the breach of fiduciary claim is time barred. Now some of you might be as unfamiliar with section 21 of the LA 1980 as you are of ball-grabbing activities. (Yes: there is life in the old joke yet).

In a nutshell, section 21(3) offers absolution for trustees and trustee shaped people from breaches of trust/fiduciary duty after six years. So say you – qua trustee – bunged the trust fund into the wrong investments because you are a bit thick – after six years from breach you’re in the clear.

The problem, though, is section 21(1). This is a two-headed avenging angel, and there is no redemption for the fiduciary – let’s say a company director like Mr Toad – who acts to the detriment of the company fraudulently. Equity doesn’t like fraudsters. (Neither does it like fiduciaries who feather their nest with trust assets – which Toad hadn’t done.)

Fraud is a nasty word, but that is what Toad had actually done.   He should have resigned from the company, shaken the dust off his feet and started afresh. He had tried to buy back Toad Hall, but the Stoats & Weasels had declined to negotiate. But all this notwithstanding, he had gone tendered against a company of which he was director. However badly that company has been treating you, it never excuses a lowering of the standard of fiduciary duty.

On a brighter side, I can report that Toad’s new company, with Ratty and Mole is flourishing and employs over 250 people. I’m sure that Mr Toad will be able to afford the relatively small amount of equitable consideration, for which he has been found liable. Also, given that the Stoats & Weasels lost on so many points of their pleaded case, the costs judgment will be lenient to Toad.

A bicycle made for two?

by Whiskers

Davis v Jackson

[2017] EWHC 698 (Ch)

This case is an abomination, and illustrates yet again that depriving people of legal aid does the development of the common law a great disservice.   Snowden J, who is a clever chap, should have known better.  The contest is between an estranged wife and her husband’s trustee in bankruptcy.

Before I narrate this sorry tale, let me ask you a question.

 Biffy buys a bicycle.  She says that if Wills pays half, then, even though the bicycle lives in Biffy’s garage, the bicycle is “as much his as hers”. The offer isn’t time limited.  

Wills doesn’t pay half. What interest does he have in Biffy’s bicycle?

I know what you are going to say.  It’s “diddly squat”, isn’t it?  

Or is it? If you yourself have a bicycle, can anyone come along and claim halfsies, if they give you half the purchase price?  No, clearly not.  Biffy has parted with something.  I’d say this “something” was a contingent interest in 50% of the bicycle.   

Anyway, back to the case. Mrs Jackson (“Mum”) – let’s pretend we’re touchy feely family bods here – is married to Mr Jackson (“Dad”).  They have been “estranged” since 2001.  However, they are still married. Mum has four children, but it’s not clear that they are Dad’s too, or some other dad.  Anyway, Mum brings one of the kids to court to help her.  She’s called “Monique”.  Snowden J says nice things about Monique:

“But I must also pay particular tribute to Ms. Lewis, who does not have any legal training, but who assisted and represented her mother in difficult circumstances with remarkable ability, poise and confidence, both in written submissions and by way of oral submissions at the hearings before me.”

Sir Richard also says nice things about the Trustee’s counsel too – Ms Daisy Brown (“Daisy”) of Guildhall Chambers:

Ms. Brown, counsel for the Trustee and faced with a litigant in person, conducted the case in an exemplary manner, which reflects the stance taken by the Trustee and his solicitors.

Not that exemplary, Daisy! You could have done your job and reminded the court of some elementary principles of property.

But that’s enough ad hominem (feminam) abuse from me.  Back to the narrative.  

Mum buys Blackacre (194 Harrington Road, Beckenham) with some of her own money from a property she previously owned, and a mortgage. (Dad knows all about mortgages, having run a one-man band mortgage broking firm. Subsequently he was struck off by the FCA.)  Dad never, ever, lives there.  He occasionally telephones the kids.

Then Mum does a very silly thing. She goes to Dad’s solicitors and executes a Deed of Trust.  The Deed says that she holds Blackacre in equal shares for Dad and herself.  Why?  In evidence, she said she was told by the lawyers that this was to protect the kids if she should shuffle off the mortal.  Yeah right. 

The Trust Deed does contain a magic clause. I say “magic” because even though they read it, indeed the learned judge quotes it, the words are hidden by the cloak of not-knowingness.  It states – and think back to the bicycle that started this story – that Dad’s getting fifty percent of Blackacre is in consideration of him paying half of the mortgage payments and outgoings.

 Are we agreed here?  In the real world, Dad has a contingent interest, which becomes actual, if and only if, he coughs up the wonga.  In Snowden-world, though, the grand wizard pulls out magic pixie dust from his robes, sprinkles it on Dad’s contingent interest, and like some New Testament miracle, the halt can walk and the blind can see, and Dad has got his share upgraded.  

Mum then gets into trouble with her mortgage payments. The extent of Dad’s help is to get her a new, shiny mortgage.  A condition of the mortgage is that the legal title is transferred into both their names.  So Dad has finally given some consideration – the value of his joint covenant. 

Imagine that this is pre 1998, what do we have? Again, in the real world, we have joint legal tenants, with Dad having a contingent interest thingy in the equitable title.

However, this all happened in 2007. What’s changed?  That little box-ette on the TR1, which joint legal tenants tick to record the beneficial interest.  Unhelpfully, Mum and Dad’s solicitors tick that little box on the TR1 saying that they held Blackacre on trust for themselves as joint tenants.

And off Snowden goes on his Stack v Dowden frolic.  His subversion of the case is breath taking.  Have you read Stack v Dowden recently?  It’s about cohabitants.  Ms Dowden, was you might remember, TfL’s most senior engineer.  She had lived with Mr Stack for thirty odd years and also had four kids by him. Stack v Dowden is a Baroness Hale special.  As a matter of policy, it is beyond criticism.  As a matter of law – and I say this as a Baroness Hale groupie – it is a bit pragmatic.  Far be it from me to ally myself with pillars of the establishment, but I’m rather with Lord Neuberger in this judgment. 

Stack is therefore instantly distinguishable. It is about cohabitants and a family home.  It is not about a home purchased by an estranged wife with her own money, and with the mortgage liability solely discharged by her, to provide a home for herself and her children.

But let’s put Stack aside, and let’s put Mum’s mere equity for undue influence/mistake aside (as the learned judge did) and think about what interest Dad has after Mum ticked the fatal TR1 box.  Two possibilities, I suggest. 

Firstly that Mum ended the trust that the trust deed had created and resettled Blackacre so that she gratuitously conferred a beneficial interest on her estranged husband.

Secondly, Mum ticked the box because as far as she was concerned she already held Blackacre not absolutely, but contingently for her husband, and for herself. As Baroness Hale says in Stack, the starting point is the TR1, and you need proof of the parties’ intentions to go beyond that.  I’d say a trust deed was pretty good proof.

Much later, Dad went pop. His trustee in bankruptcy went after half of Blackacre.  I don’t doubt that Snowden J thought he was doing the right thing by using equitable accounting to reflect Mum’s contributions, and get her a bigger share.  However his starting point is fundamentally misconceived. 

This is a very unfortunate case. I was reminded of Lord Denning’s words in another lamentable case about errant equitable interests: Re Vandervell (no 2)

[Counsel] realised that the claim….had no merit whatsoever. He started off by reminding us that “hard cases make bad law”. He repeated it time after time. He treated it as if it was an ultimate truth. But it is a maxim which is quite misleading. It should be deleted from our vocabulary. It comes to this: “Unjust decisions make good law”: whereas they do nothing of the kind. Every unjust decision is a reproach to the law or to the Judge who administers it.

 

 

 

When I use a word, said Humpty Dumpty…

Wood v Capita Insurance 

[2017] UKSC 24

I imagine the Supremes sitting in their kitchenette idly flipping through the appeal petitions and bickering about which ones are going to be allowed.  All the judges will have their own hobby horses and bêtes noires.  Baroness Hale is unlikely to get fired up over a dodgy tax scheme, whilst Lord Sumption is not even going to read petitions that originated in the Family Division.   Horse trading and tactical voting will take place, with Lord Neuberger being grand and statesmanlike, and Lady Hale being smiley and steely and softly, softly, catchy monkey

So whose itch was this case scratching?  The most likely is the Supreme who gave the only judgment: with Lord Hodge.  Lord Hodge is the Scottish Judge, who tends to the commercial end of the spectrum.  Either that, or he’d won a game of rock-paper-scissors, with Lord Carnwath, who was still sulking over losing in Arnold v Britton.

What had riled Lord Hodge, was the apparent suggestion that there was some kind of “rowing back” from Rainy Skies orthodoxy in the majority decision in that aforementioned ghastly case Arnold v Britton.

Capita’s ground of appeal had been on this very point.  The Appeal Court had dismissed the idea that there was any dissonance between the two cases.  Capita had therefore claimed that excessive reliance on the textual purity approach in Arnold had meant that the contextulism advocated by Rainy Skies  was occluded. If the Appeal Court had taken a more contextual approach, then they would have put greater reliance on the matrix of fact, and Capital would have won.

The facts of the case are dull and predictable.  Some company of which Mr Wood was the 93% shareholder, and one of three directors was sold to Capita Insurance.  The business of the company was selling insurance to owner of classic cars.  The business  model was slightly more dodgy:  a classic car owner would input their details into an aggregator on the internet, and would be given a quote.  Funnily enough, when the punter was subsequently rung by the salesman to take credit card details, the premia had increased from the website quote, even though the risk profile hadn’t changed.

Capita reported themselves to the FSA, and had to compensate punters who had been diddled under l’ancien regime.  They therefore tried to claim on the warranties that Mr Wood et al had given them under the SPA.  The argument developed around the wording of the indemnity.  At first instance, the insurance company had won in front of  Popplewell.   A strong appeal court had held for Mr Wood, and if you read the clause, you’ll see for yourself, that it’s ambiguous.  In a nutshell, the draftsperson hadn’t considered a situation where loss might arise from the Capita whistleblowing on itself to the FSA as it was bound to do, under FSMA 2000.

The panel agreed with Popplewell,  and the appeal allowed Lord Hodge a platform to reformulate the orthodoxy.  First of all, he said, he was not going to reformulate the Rainy Sky and Arnold guidance.  However,  he thought he’d like to explain why Arnold was not a recalibration of Rainy Sky.

A court’s job was not to use a slavish, literalist approach, parsing each word like a GCSE English paper.  Rather, the contract was to be seen as a whole, depending on its nature, formality and quality of the drafting.  Greater or lesser consideration to these elements should be given, depending on the wider context.

Lord Hoffmann’s bid for judicial immortality in ICS v West Bromwich, where contextualisation was hailed as a novelty, should be put in its historical context.  The factual background known to the parties at or before the date of the contract had been considered far earlier in Prenn v Simmonds and Reardon-Smith v Yngar Hansen-Tangen by one of the pantheon, Lord Wilberforce.  Further, the sainted Lord Bingham had written a sound piece in the Edinburgh Law Review, which had said Hoffmann, was, as per usual, bigging himself up and pretending to be original.

Reprising Lord Clarke in Rainy SkyLord Hodge said that construction is a unitary exercise.  Where rival meanings exist, then it is appropriate to view them through the prism of commercial common sense.  The unitary process is also an iterative process:

“it does not matter whether the more detailed analysis commences with the factual background and the implications of rival constructions or a close examination of the relevant language in the contract, so long as the court balances the indications given by each”.

And feeling the need for a good sound bite for undergraduates and GDL-ers he says:

 “Textualism and contextualism are not conflicting paradigms in a battle for exclusive occupation of the field of contractual interpretation.”

Finishing off, with a rousing and patriotic chorus (all together, now):

  1. On the approach to contractual interpretation, Rainy Skyand Arnold were saying the same thing.
  2. The recent history of the common law of contractual interpretation is one of continuity rather than change. One of the attractions of English law as a legal system of choice in commercial matters is its stability and continuity, particularly in contractual interpretation.

So now we all know where we are, and Lord Hodge would be ever so grateful if this could be the last word on the subject for a while.

Getting hurt in far away places

by Whiskers

MIB v Moreno is the penultimate case of the legal year. It should not share the opprobrium of some cases rushed out carelessly by a de-mob happy judiciary eager to clear their desks before long vacation, but it feels rather unloved.  The result is probably the right one for those who value consistency, but I do prefer Moore-Bick’s Appeal Court judgment in Jacobs v MIB on precisely the same point. 

The case is about hurting yourself in faraway countries. Or more precisely, if you do hurt yourself, by what country’s law are your damages to be assessed?  The lex loci delicti, (the place where the accident occurred) as they call it on the continent, or the lex fori – domestic law?  There’s no obvious answer to this.  On the one hand lex loci delicti prevents arguments, especially when there are three nationalities involved eg a French man hits an English woman in Italy.  However once liability is established, then there’s a powerful argument for saying that damages ought to be assessed in the country where the victim lives. 

 This was illustrated by the case of Bloy v MIB which followed Jacobs.  The facts were tragic.  A baby and his mum injured by an uninsured driver, and the damages in the lex loci delicti (Lithuania) were capped and insufficient to compensate the baby for the lifelong care he was going to need.  This is how it used to be in the UK, as illustrated by the House of Lords case of Harding v Wealands.  Liability assessed by Australian law and damages with reference to UK law. 

Lord Clarke was clearly in grumpy mood and didn’t want to be there at all. He brought up Harding v Wealands even before the MIB’s counsel had got his ducks in a row.  Lord Clarke made it obvious that he wished poor Mr Mercer from Essex Court Chambers – a diffident but quietly determined advocate – would shut up and let him go back to deciding what books he was going to take on his hols.

Lord Mance and Lord Toulson were gentler and looked grateful for Mr Mercer’s comprehensive history of motor insurance in Europe. Mr Mercer’s junior was scarily clever Marie Louise Kinsler from 2 Temple Gardens.  She kept passing him notes and whispering the answer to all those nasty questions from their Lordships.

 The question, as Lord Clarke kept pointing out, was a simple one. If, as happened to poor Miss Moreno, you are a pedestrian hit by an uninsured Albanian driver in Greece, should Greek law decide how much compensation you get, or should English law? 

English damages for RTAs are more generous than most of Europe. So Miss Moreno clearly would have preferred those.  On the other hand, the scheme by which the Motor Insurance Bureau was liable to compensate her – Regulation 13(2) of the Motor Vehicles (Compulsory Insurance)(Information Centre and Compensation Body Regulations) 2003 (SI 2003/37)(“The Regulations”) – only allowed the MIB to claim damages back from Greece at the level they would have been in Greece.

 Now to put this in context, British drivers who hit people and things in Europe pay damages according to the law of the country where the prang happened. Also, if you’re hit by an insured driver in Europe, you get damages according to the lex loci delicti.  Why then should those with the misfortune to be hit by uninsured reprobates be better off. 

 Well why indeed? Unfortunately, as Moore-Bick LJ said, because our Regulations, which give effect to this diktat from Brussels – the Fourth Directive on Motor Insurance – (although quite a useful diktat in many ways) say that.   And although we now have a policy that UK legislation should be read in such a way as to give effect to EU legislation – the Marleasing case – you can’t just re-write UK legislation to make it compliant.  Or, as Lord Mance said, using Latin for extra gravitas, the court cannot act contra legem.

 Instead, what you have to do is make an application to the European Court of Justice who tells you that your draftspersons are rubbish and then Parliament has to change the offending law. Needless to say this is all a lot of fuss, and quite frankly why bother now that we’re out of there anyway? 

 Once we had been treated to a comprehensive history of motor insurance in Europe with extensive and close textual analysis by Mr Mercer, it was time for Mr Beard to rise. He seems not to have bought a clever little friend along with him.  There was a teenager in the solicitors’ benches, who might have been there on work experience, and behind him four civilians who presumably had come down to London to see justice done.  Although they sat very still and listened attentively, one had to wonder whether it’s kind to force non-combatants to undergo this type of experience.

 Lord Hodge regarded Mr Beard with less impatience, perhaps because Mr Beard did not want to give a revisionist version of the history we had heard. Mr Beard talked much about people having “to lump it”.  Lumpage is a new term of art for when you find yourself on the wrong end of a conflict of laws point, I think.  Lumpage was regarded as a Bad Thing, but a necessary evil, especially when Regulations which were supposed to implement EU law smoothly, without any fuss turn out to do just the reverse.  He resisted all the onslaughts of all five justices, and maintained his submissions of fidelity to the laws of the UK as drafted. 

 You decide: when an SI – a baby law – says this…

 the compensation body shall compensate the injured party in accordance with the provisions of Article 1 of the second motor insurance directive as if it were the body authorised under paragraph 4 of that Article and the accident had occurred in Great Britain.

What’s your reaction?   Act as though the accident had indeed happened in GB. Seems logical? 

Ultimately, though, it was not to be. The Supremes bowed beneath the weight of history and succumbed to the siren songs of pan-European tortious conformity.  

 The words of legal fiction – as if the accident had occurred in the Great Britain – were held merely to extend the existing scope of the MIB’s compensatory liability, not to set out the basis for assessment of loss.

 So, Brexit may be coming some day, but this doesn’t stop their Lordships liking their law nice and tidy. Anomalies are bad, even if Moore-Bick could live with them.

Tell me Sweet little Lies

Versloot Dredging v HDI Gerling Versicherung Industrie AG

[2016] UKSC 45

Should an action be sanctioned according to its actual consequences or is dishonesty itself worth of adverse sanction? Should we punish dishonesty pour encourager les autres, especially where fraud is rampart and difficult to detect?

 Those of you who were fortunate enough to have done jurisprudence will be familiar with the debate, and no doubt this case brought back happy memories of sunlit tutorials to the Supremes.

This is an important case.  On the glorious 12th, not only will we be able to shoot grouse, the fresh faced Insurance Act 2015 will come into force.  (I went to an utterly incomprehensible talk about it by a clever young lad from Fountain Court back in the spring, but still feel unprepared for this glorious day.) The Marine Insurance Act 1906 is amended, but has been given a makeover for the cuddly exigencies of the new millennium.

What the fresh-minted Insurance Act 2015 doesn’t tell us, though, is what a “fraudulent claim” actually is. How rotten is rotten?  This case tells us what “fraudulent claim” isn’t. 

So back to my introductory question, if I set out to do a naughty thing, but do not succeed, should I suffer adverse consequences?  Let’s look at this in the insurance claim context, on a sliding scale.

I set fire to my factory, because it’s making a loss and I need the money from the insurance policy?  Fraudulent/Not Fraudulent?

I think we are all clear on that one. Getting the matches out is way more culpable than falsehoods.  

I pretend that I had ten Hermes scarves in my genuinely lost luggage, when all I had was a few bits and bobs from Primark;  fraudulent/not fraudulent?

Ten’s probably taking the p***.  How about one or two, though?   It’s only an insurance company after all. I suspect most of the readers of this blog probably wouldn’t exaggerate their claim.  Nor would I.  It’s just rather tacky.  And anyway how many Hermes scarves does a girl need?

Now what about when my house is broken into.  In my insurance claim, I say I returned home on the last train, but I didn’t notice anything until next day, when I surfaced with my hangover? 

The truth is that I didn’t go home at all that night.  But I don’t want my husband, (who’s on holiday with the kids) to find out that actually I went home with my  hot new personal trainer, Danny.

 I’m telling a porkie, not to bolster my claim, but so as not to upset the matrimonial apple cart.  Fraudulent? Something we’d all do? Enough to let the insurers wriggle out of their contractual obligations?

Of course, gentle reader, you are not the sort of moral reprobate that would go home with a person to whom you were not married for carnal purposes.  So this wouldn’t apply to you.  But if you were?  Wouldn’t that little white lie be practically a moral imperative?

In this case, the DC Merwestone, an old workhorse of a ship, was wending its way back to the Netherlands from Lithuania.   One of the crew left the wrong tap open and the cruel sea flooded into the engine room causing €3.2m worth of damage.  

The Owners didn’t want tedious and lengthy investigations about the ship’s seaworthiness, and suggested to the Insurers that it was a faulty bilge alarm, or perhaps a stray albatross had caused the mishap.  It wasn’t a very enthusiastic porkie, nor one that they persisted in. As it happened, they were insured for the loss anyway, and but for their porkie, the Insurer would have had to pay out.  The ship was seaworthy too, but they weren’t giving the Insurers a chance to delay a badly needed payout.

 The term of art for this kind of postmodern view of the truth is “a fraudulent device”.  At first instance, Popplewell J held that the Owners were hoist on their own petard and the Insurers had acted lawfully.  He clearly felt unhappy with his decision, though, but was bound by the very firm 2002 judgment of Mance LJ in The Aegeon.

The result is that Gerling got to avoid a contract because the society has traditionally held insurance contracts to be “special”.  Like fiduciaries, a higher standard of probity is expected from policy holders in an insurance contract.  Traditionally insurance contracts have been uberrimae fides.   The “informational asymmetry” merits the law’s special protection.   

What level of protection is appropriate in these egalitarian, fair-minded days.  Should one half-hearted little fib entitle the insurer to a sin tax of potentially millions of pounds?

No, said Lord Sumption, giving the leading judgment. He rebadged “fraudulent device” as “collateral lies”, and came to the conclusion that this mollycoddling of the insurance industry was out of date.  Perhaps such preferential treatment was justified by social context in 1906 when McKenzie Chambers put pen to parchment, but it was wholly inappropriate now.  Dishonesty without consequences should not be so severely punished.  His is a fine, rigorous and historically grounded judgment, where policy is modestly clothed in precedent to give a tailored finish. 

 Lords Clarke and Toulson had a brief assenting chunter, but it was criminal/family judge, Lord Hughes really got his teeth into it.  It would be sneery of me to imagine him saying to himself “Finally, “dishonesty!  I know what that means!”  His judgment is more nuanced than Sumption’s, but essentially comes to the same conclusion.  The court has no business sanctioning mere lack of moral hygiene.

 So it was left to Lord Mance to defend the moral high ground, and his position in The Aegeon.  Any lie is bad, he said.  The informational asymmetry between insurer and insured merits the greatest solicitude.  Any tolerance of dissimulation fosters an environment where fraud can flourish.  It is artificial to draw a distinction between a lie’s intention and its consequences.  The judgment is couched in utilitarian terms, but there is a ring of genuninely held belief.  A lie is a lie.  And that’s all there is to it.

 So back to our examples. The arsonist is not let off the hook, nor the embellisher of genuine claims.  A policy holder with a genuine claim, who tells lies in order to facilitate their claim or save their marriage does not however suffer forfeiture.  Does that feel right?  I think that’s probably a matter of personal taste.

 This  judgment is bad news for the industry, but then so is the new Act. I’m guessing there’s going to be a lot of litigation as insurers work out where they are. 

Note that this judgment deals with the common law position.  If Insurers want to put in anti-fraudulent device wording in their policies, they can, providing that they comply with the transparency requirements of the legislation.

Bailii judgment

Post script:  the DC Merwestone was repaired and continues to plough her weary furrow.

Faites vos jeux, Flopsy, Mopsy and Cottontail

By Cheesy

Playboy Club London v Banco del Lavoro

[2016] EWHC Civ 457

So much to dislike about this case, but so many lolz too.  Gambling, caddish behaviour and tort law.  A dress code for bunny girls that really puts the PWC heels story in perspective. The Respondent here was Hefner’s Playboy club.

Also the story line is reminiscent of an episode of Inspector Montalbano.  Except the plot thickens, or perhaps curdles, in Parma rather than Sicily.  One Hassan Baccarat (Barakat) spends most of his time gambling at the Casino du Liban.  This is near Beirut, and has the cheesiest of cheesy websites:  check it out!

Wishing for something more sophisticated perhaps, he’s recommended a London club by the manager of the Casino du Liban, where the croupiers pretend to be bunnies. And not even convincing ones.  Lebanese Manager recommends Hassan to Chief Rabbit at the Playboy as a fool likely to be soon parted from his money.

So far, so of sociological interest only. But Hassan needs to open an account at the Warren before he can play, and for this he needs a bank reference. Hassan produces the card of one Paola Guidetti, a bank manager at the Parma branch of the Banco del Lavaro.  As this is Montalbano, I’m guessing Paola is luscious and has an audacious cleavage and vertiginous high heels.  Chief Rabbit is far too discrete to approach the bank himself.  Instead he does it through eminence grise bunny, its service company called “Burlington”.

Eminence grise rabbit faxes the bank and using Banco di Lavoro notepaper, sultry Paola responds to the enquiry about her (???) lover’s liquidity.  Good for £1.6 mil, a week, she writes confidently in fluent English, though using a rather unsightly CAPITALISED font.  “PRIVATE AND CONFIDENTIAL.”

Two things are a bit wrong with this.  First of all, the Banco di Lavoro didn’t know that they were credit referencing to Flopsy, Mopsy and Cottontail, But, whether they did, or they didn’t, they are fixed with apparent authority and there is and end of it.  There was no appeal on this.   Secondly, there wasn’t even one lot of £1.6m in the bank account; merely a bank account opened with the promise of that sum to be deposited.

Hassan turns up at The Burrows, and the Flopsy, Mopsy and Cottontail, the Chief Rabbit’s cashiers let him have £800k of chips (or “plaques” as they are called).  The cheques admittedly looked a bit odd, – sort of, uh, photocopies, but as Hassan comes highly recommended, that little detail was overlooked.  Hassan then plays lots and wins a bit and then loses lots.

Yes, I’m guessing you know what happens next, because you’ll all have seen the films/series.  Hassan is unmasked, and, resplendent in DJ, gets into a high performance fanny magnet and is pursued around scenic London by Flopsy, Mopsy and Cottontail. Not that one.  Wrong film. Television isn’t real, you know!

No, the one I’m thinking of, is that the cheques bounce and Hassan disappears back to the Levant, where he carries on gambling happily.  Flopsy et al sue Banco del Lavoro for negligent misrepresentation with damages of £1.25m.  (Paola is let go by the bank.  It seems she has been careless with her favours elsewhere).

At first instance, HHJ Mackie found in favour of Chief Bunny.   Following Heller, which itself involved a dodgy credit reference, he found that Banco del Lavoro was skewered good and proper by Paola, and had assumed liability not just to the Burlington front bunny, but also the Club itself. 

And also, the counterfeit cheques didn’t break the chain of causation.  At least the judge knocked something off the claim for contributory negligence.

The Appeal Court took a different view and allowed the bank’s appeal.  Longmore LJ disagreed that the Burlington reference could also be relied on by the Chief Rabbit. The bank had not assumed any responsibility for the Playboy Club.  of the ambit of Longmore said, that if Flopsy wants to protect the identity of its customers by using a lagomorphic front company, then the bank is entitled to believe that its representation would not go any further.  The learned lord justice pointed out this tactic of “the undisclosed principal” type of jag might have worked in the seminal case of Hedley, but the facts of that case could be distinguished.

Once the court had decided this, then the novus actus point becomes redundant.  However, obiter he held that the counterfeit did not break the chain of causation.  It’s difficult to argue with that. 

I was amused by counsel for the bank’s question to the actual cashier, who accepted the photocopied cheque. 

“Would you have accepted such a cheque in payment for your own car?” 

“Of course not!” the lady replied indignantly.

No new law here, but a nice story for the weekend, with a moral and principled end.

 

NOVEMBER IMPORT 010

The Chief Rabbit

 

Law (Reform) in Action

By Whiskers

In this alleged age of austerity, the great offices and mighty organs of state must earn their keep.  Just as His Grace the Duke of Wellington would be bemused at the sight of the Guards hiring out their mounts to tourists for rides, so in the same way, Lord Eldon would be taken aback, by the vision of civil justice system qua cash cow, rather than something provided for subjects by the sovereign.    Of course Lord Eldon didn’t have such an enthusiastic family division clamouring for funds.

The main thrust of the Civil Courts Structure Review is based on the Susskind père et fils vision of the legal future, where lawyers are replaced by IT systems.  (Although some of us might welcome the thought of being pensioned off, and retiring like the Emperor Diocletian to grow cabbages in Dacia).  It is part of a seismic reform of the courts and tribunals service in England and Wales.

Briggs LJ* is the acceptable, nay the utterly charming side, of this dystopian future. He has been commissioned by the “Lord Chief” (as he calls Lord Thomas of Cwmgiedd, with shades of le Carré) to advise on one small part of this revolution.  The most eye-catching being to subject all claims under £25k to be dealt with on line.  As part of his brief, he is travelling the length and breadth of the jurisdiction, listening to what these days are called “Stakeholders”. (no, not steak holders, Squeaky).

Last week, however, Briggs LJ was consulting a mere hop, skip and a jump away from the RCJ, in the marbled halls of magic circle firm, Freshfields on Fleet Street.  He was the honoured guest of an elite group of dispute resolution knowledge workers**, known as the Association of Legal Professional Support Lawyers. 

Briggs LJ took the assembled shamans through his proposals, but it was clear that he had come not to preach, but to listen.  Giving off the air of a kindly, but razor sharp Classics master, the learned judge appeared genuinely delighted that he had found so many people who were prepared to talk endlessly of portals and costs and access. 

Briggs LJ’s most rapt listener was, however a black Labrador who sat in the front, with his companion human.  It was clear that the learned judge just as taken by Lester – for such was this splendid beast’s name – as Lester had been by Briggs.  Disappointingly, Lester’s companion human said she couldn’t claim the dog was named after renowned human rights lawyer, Lord Lester of Herne Hill.  But if the human rights movement needed a mascot, Lester would fit the bill. 

This “informal consultation process” is a wonderful idea.  Take someone really bright, and get them to go around asking questions of people who are interested in what is being consulted on, and then write an essay about it.  Of course we don’t always get the result we want, or the result that the essay writer envisaged.  You could ask Jackson LJ about how that feels.   

Law Mice was lucky enough to chat with a couple of representatives of Dispute Resolution Plc, (or Practical Law, as I was sternly told they had now rebranded).  Plc is the BFF of shamans, and knowledge workers everywhere. They write about all areas of the law in a calm, accessible and bang up to date sort of way, so it was nice to put faces to content. 

So thanks to them, and to the Freshfields PSL team, for a nice trip away from the wainscot and for an insight into how a country’s justice system develops.

 

*Much admired by Squeaky for the clarity and confidence of many of his judgments.  Squeaky ♥  Curtis v Pulbrooke as all his students will know, not to mention the lengthy Lehman’s case on segregation of trust assets, and last year’s cracker Juliet Bellis v  Challinor.

** Professional Support Lawyers (“PSLs”) are employed by the larger firms to know lots about lots of things.  They spend their time reading stuff so that their colleagues don’t have to.  They like nothing better than answering questions about the minutiae of law and procedure.  Sometimes, they try and share all the things they know with their comrade fee earners either by writing stuff or telling them stuff, often in that City institution, the lunch time training session.

Carlile on State Security and Bed Linen

Law Mice went out on a rare excursion to a local college last night, to hear Lord Carlile, the Lib Dem peer, former North Wales MP, Criminal Silk and one of the Great and Good.   Lord Carlile was also the Independent Reviewer of Terrorism Legislation from 2001 – 2011 and the theme of his talk was the balance between privacy and state security.

An engaging and entertaining speaker, he gauged his audience of law students, thirsty for the waiting refreshments and wore his learning lightly.  Starting the talk with the comedic vision of himself on an exercise bike watching BBC Breakfast at half past stupid in the morning, he said this self-mortification was like state security.  You had to exercise, to enable you to eat and drink merrily without surrendering prematurely to decrepitude.  In the same way, state security existed as a necessary evil for the efficient flourishing of the body politic.

Commenting on our fears of Big Brother and state run thought police, Lord Carlile pointed out it wasn’t the state we had to worry about.  It was Amazon and the online grocery retailers, for example, who truly had our measure.  They know all our little péchés mignons, from an unhealthy obsession with novelty post-its, to a faiblesse for umeboshi plums.

Lord Carlile himself felt that this sort of knowledge in private hands was undesirable. Whether you agree with him or not probably says a lot about you.  (One should, however, probably not base privacy legislation on the middle aged, middle class subject whose greatest sin is binge drinking whilst binge watching box sets).

But the most striking image of the evening was the rebadging of the senior judiciary as Comfort Blanket. Lord Carlile was talking here about the control orders under the Prevention of Terrorism Act 2005, passed in reaction to the destruction of the Twin Towers.

A control order, if I remember correctly, was imposed on people suspected of involvement of terrorist activities, but where there was insufficient evidence to charge them.  There were twenty-three ways control measures, including, for example, restricting the number of mobile phones a person could have, or at its most draconian, removal into a kind of internal exile.  The measures were heavily criticised.  However, there was judicial oversight.

Or as Lord Carlile put it:  what do politicians and Sir Humphreys do when they feel uncomfortable about something?  Get a High Court judge in to review the action/decision or hold a public enquiry.    High Court judges are the ultimate in snuggly-buggly eiderdown accessorizing for the holders of executive powers.

It was a good point, well made, but this rebranding may come as a surprise to the senior judiciary themselves.  All that grafting, all that law, all those little grey cells at the service of Her Majesty, to end up as an item of luxury bed linen!

It is a gracious compliment to a group of individuals whom society, by and large, still values as a body of intelligent men and women, beyond reproach.  One thinks again of Pericles’ funeral oration in Book II of Thucydides’ Histories, when he says “The best virtue of a judge is never to appear in the Daily Mail*.

Were this an episode from a box set, then I would have left the meeting with a warm feeling that the state was good and looking after me.  Even if it did go a bit too far occasionally, then Her Majesty’s judges and kindly senior members of the bar would intervene.    And I’d have got home and found a dead body, hideously slaughtered in my kitchen.

Thankfully, though, I didn’t.  That’s because I still live within the jurisdiction of England and Wales and such trust in the powers that be, may not be too far misplaced.

*μεγάλη ἡ δόξα καὶ ἧς ἂν ἐπ᾽ ἐλάχιστον ἀρετῆς πέρι ἢ ψόγου ἐν τοῖς ἄρσεσι κλέος ᾖ.  Well he said it about women, actually, but it’s a loose translation.

Omerta

Omerta is the code of silence that supposedly binds members of criminal gangs in Italy.  Lawyers take the same vow of silence.  What a client tells you must not be revealed, unless ordered by a court.  The idea is of course that it encourages clients to tell their lawyers the whole truth so they can provide properly informed advice (and don’t get dropped in the clarts when it all comes out six months later…) 

Lawmice were interested therefore to see an item on Legal Futures this week where a solicitor talks about his momentous decision to breach this duty.  Stephen Chittenden is putting his Archbold back on the shelf for the last time after forty years as a criminal defence lawyer, and has unburdened himself of his terrible deed.   We thought it might be interesting to see how the courts had dealt with this ghastly affair. 

In 1978, Mr Chittenden represented a teenager, Fitzroy Brookes.   Fitzroy was accused of murdering his friend and neighbour, sixteen year old Lynn Siddons.  The boy was acquitted. During the course of the trial, the real culprit appeared to be the boy’s stepfather, Michael Brookes. 

Exactly what was going on with the CPS and CID in the 1980s Midlands is difficult to comprehend.  It wasn’t as though Michael Brookes was – in the manner of “Nordic-Noir” – a man of power and influence.  He was a minicab driver.  Nonetheless the prosecuting authorities made a fine Horlicks of it all.  The police even managed to lose a rather relevant pair of blood-stained trousers and a knife.  These had been handed in by the incoming tenant of Michael Brookes’ former council home.   

Unable to get justice for her granddaughter any other way, Lynn’s Nan, Flo, was not prepared to let the matter lie.  As Lynn’s executrix, she brought a civil action against the ensanguined Michael for damages for battery of her daughter.  Tort students may remember the case as Halford v Brookes (no 3).  Civil actions for criminal acts are more common now, but in the 1990s, this was radical stuff.    

Flo’s London solicitors asked Mr Chittenden for his old files from Fitzroy’s trial.   Now, at this stage, as Rougier J makes clear in his judgment, the solicitors were only contemplating an action against Michael.  As it turned out Flo later decided to amend her claim to embrace young Fiztroy just to be on the safe side.  Mr Chittenden did not, at the time of the original request, know that the civil action would eventually be brought against both Michael and his own client.    

Mr Chittenden describes his moral dilemma: 

“I had a murderer out there, wandering free, an inept police force and a distraught family. What do you do about that?   

“I had to do something about it. There’s a dead girl and you have the information to enable a prosecution to be brought. Only your conscience at that point can answer as to what you should do. 

“My mind said to me, ‘You have to do this’, but I was risking being struck off as a lawyer if it ever came out that I had handed over my documents to the prosecution. 

“I spoke to my wife and told her about the predicament and she backed me. We had a young family, three boys, I was risking all that.  But I was torn between professional duty and common sense.  I couldn’t not do it.” 

 Flo won damages for the battery of her granddaughter.  Rougier J gave a powerful judgment in which he found stepdad Michael guilty of Lynn’s murder.  Even the CPS could not ignore this, and in due course Michael was convicted and remains in prison.   

The files that Mr Chittenden sent to Flo’s solicitors came up for judicial consideration in both Halford v Brookes (no 2) before the Appeal Court, and Halford v Brookes (no 3).  Flo was not allowed to rely on the material contained in them.   Rougier J held that there was nothing in them that could not be sourced from the transcript of the 1978 trial. He ordered that the files be returned to their legal owner.   Ultimately therefore Mr Chittenden’s actions had little bearing on the outcome of the trial.  Incidentally, as the client, the legal owner is in fact, young Fitzroy so he ended up with the files.   

But that was not the end of the story.  In Derby Magistrates ex parte B, the stepfather attempted to get hold of the same files to use in his defence. The Lord Chief Justice, Lord Taylor of Gosforth was unequivocal about lawyer – client privilege being sacrosanct: 

“But it is not for the sake of the applicant alone that the privilege must be upheld. It is in the wider interests of all those hereafter who might otherwise be deterred from telling the whole truth to their solicitors. For this reason I am of the opinion that no exception should be allowed to the absolute nature of legal professional privilege, once established.” 

Given recent  stories of the authorities bugging client lawyer conferences in prison, this judgment has considerable relevance.   

Mr Chittenden, despite both the High Court and the Court of Appeal taking a neutral view of his conduct, clearly had his dereliction of duty on his conscience.  The interview on Legal Futures now moves from Nordic Noir to Magical Realism.  Mr Chittenden goes on: 

“A couple of years ago, I ran into a former judge while I was on a ferry to Spain. We ended up talking about the Lynn Siddons case and I told him what I had done, releasing the papers.   

“I said to him, ‘Should I have done it?’ and he replied ‘Yes’, so I feel completely absolved.  “It has taken more than 30 years but I feel I have finally got it off my chest. It feels cathartic.” 

I wonder who the judge was.  Probably it wasn’t Sir Richard Rougier himself who died in 2007. I found the interchange oddly moving though.  The informal absolution of a sin from a priest against whose code Mr Chittenden had transgressed.   

A sour note from the SRA saying it is considering its position in relation to Mr Chittenden ends  Legal Futures’ account.  They should get back in their box.  If they cared that much, then they, or their predecessors should have acted back in 1993.  Although given the attitude of the judges involved, that would have been rather presumptuous.   

Lawmice are pleased to wish Mr Chittenden a long and honourable retirement.