Court of Appeal addresses fundamental point of trust law in LA Micro Group (UK) v LA Micro Group, Inc. for which William Buck acted for the Appellants

On 28 February 2023 the Court of Appeal provided its second judgment in LA Micro Group (UK) v LA Micro Group, Inc. [2023] EWCA Civ 214, a dispute which has generated numerous complex legal arguments over its life.

On this occasion the Court of Appeal addressed whether a constructive trust came into existence when the legal owner of property (the property being shares in LA Micro Group (UK)), and who held that property on express trust, had entered into a specifically enforceable obligation with the beneficiary of the express trust to transfer back their beneficial interest to the legal owner – such that the legal owner held both the legal interest (as a trustee of the express trust) and the beneficial interest (as a beneficiary of the constructive trust, albeit under a ‘sub-trust’). The relevance of this point was the need for there to be a constructive trust, parasitic on the entering into of the specifically enforceable obligation, so as to avoid the formality requirements of s.52(1)(c) of the LPA 1925 and where, on the facts, those requirements had not been complied with.

In determining that a constructive trust did come into existence, the Court of Appeal held that the sub-trust was created and then died “at the same moment”, the effect being to vest absolute title in the original express trustee, and that it was not fatal to that trust analysis that the legal and beneficial interest were held, for that moment, by the same entity.

Separately, the Court of Appeal also held that there existed irreconcilable internal inconsistencies with the judgment under appeal in respect of a proprietary estoppel claim (upon which the Respondents which had been successful at first instance), where the representee’s actual state of mind was entirely contrary to the alleged estoppel.

William Buck, leading William Hooper, acted for the Appellants, instructed by Tom Bolam and Cecilia Ricks at Fladgate LLP.

So Long, Farewell, Auf Wiedersehen, Adieu –the CJEU gives its last judgment in a reference from a UK Tax Tribunal

Case C-695/20 Fenix International Ltd v HMRC, Court of Justice of the European Union (Grand Chamber), EU:C:2023:127, Judgment of 28 February 2023

Fenix International Ltd operates the well-known www.OnlyFans.com website/online social media platform, which allows “Creators” to post content for “Fans” in return for payment. Fenix’s case is that it acts as agent in respect of transactions between Creators and Fans. Fenix charges Creators a 20% commission on all sums paid by Fans, and accounted for VAT in respect of that intermediary service for the accounting periods at issue. Thus, if a Fan pays 100 and Fenix charges the Creator commission of 20, Fenix accounted for VAT on the 20, rather than the 100.

HMRC assessed Fenix for VAT on the basis that Article 9a of Council Implementing Regulation (EU) No. 282/2011, which was directly applicable in the UK prior to IP Completion Day (23:00 GMT on 31 December 2020) and which remains applicable in the UK, deems Fenix to be liable for VAT on the 100. Fenix paid the assessments and has accounted to HMRC for VAT on that basis since HMRC’s decision. However, it appealed the assessments to the First-tier Tribunal (Tax Chamber) (“FTT”), arguing that the deeming provisions go beyond the power to “implement” the Principal VAT Directive, in this case Article 28 PVD, conferred on the Council by Article 397 PVD. Prior to IP Completion Day, any challenge to the validity of an EU Regulation could only be entertained by the CJEU; and a challenge before a national court had to be referred for a preliminary ruling under Article 267 of the Treaty on the Functioning of the European Union (“TFEU”).

On 15 December 2020, the FTT referred a question to the CJEU concerning the validity of Article 9a. On 22 December 2020, the order for reference was registered at the CJEU Registry. On IP Completion Day, the ability of UK courts and tribunals to make Article 267 references (relevantly) ended. The combined effect of the Withdrawal Agreement and the European Union (Withdrawal) Act 2018 is that the CJEU had jurisdiction to entertain the reference and that the FTT and UK are be bound by the CJEU’s answer. See “The Long Goodbye”, news item, 13 January 2021, if only for its prescient headline.

On 15 September 2022, Advocate General Ramos delivered an Opinion rejecting Fenix’s challenge (EU:C:2022:685).

On 28 February 2023, in its last judgment in an Article 267 reference from a UK tax tribunal (and possibly any other UK court), the CJEU (Grand Chamber) gave judgment. The CJEU followed the Advocate General’s Opinion and upheld the validity of Article 9a(1). The Court held-

  • the provisions of Article 9a(1) comply with the essential general aims of the PVD and, in particular, those of Article 28;
  • Article 9a(1) is appropriate, and even necessary, for the uniform implementation of Article 28;
  • the presumption in Article 9a(1) does not alter the nature of the presumption laid down in Article 28, but gives concrete expression to it in the specific context of the supply of electronically supplied services through a telecommunications network, an interface or a portal such as a marketplace for applications;
  • where a taxable person who takes part in the supply of a service by electronic means, by operating, e.g., an online social network platform, has the power to authorise the supply of that service, or to charge for it, or to lay down the general terms and conditions of that supply, that taxable person may unilaterally define essential elements relating to the supply, namely the provision of that service and the time at which it will take place, or the conditions under which the consideration will be payable, or the rules forming the general framework of that service; in those circumstances, having regard to the economic and commercial reality reflected by them, the taxable person must be regarded as being the supplier of services pursuant to Article 28; and the irrebuttable presumption that applies in the circumstances set out in Article 9a(1) gives effect to that economic and commercial reality;
  • accordingly, Article 9a(1) does not supplement or amend Article 28; it does not therefore disregard or exceed the limits of the Council’s implementing power; and is thus valid.

Valentina Sloane KC, leading Max Schofield of 3PB, acted for Fenix.

Andrew Macnab acted for HMRC.

Read the CJEU’s judgment here.

Read the Advocate General’s Opinion here.

Read the FTT’s decision to refer here.

Judgment in Trucks follow-on damages claim with all-Monckton cast list

The Competition Appeal Tribunal has today handed down judgment in Royal Mail and BT v DAF Trucks Limited and ors [2023] CAT 6, the first UK judgment in a follow-on claim based on the European Commission’s 2016 Trucks settlement decision. By its judgment, the Tribunal upheld Royal Mail and British Telecom’s damages claims against DAF Trucks for loss arising from the infringement of competition law found by the Commission.

A summary of the judgment has been made available on the Tribunal’s website.

All parties to the proceedings were represented by leading and junior counsel from Monckton Chambers.

Tim Ward KC, Ben Lask and Clíodhna Kelleher appeared for Royal Mail and British Telecom.

Daniel Beard KC, Daisy Mackersie and James Bourke appeared for DAF.

First-tier decision in Morrison Supermarkets overturned on appeal

The Upper Tribunal has allowed the taxpayer’s appeal against the decision of the First-tier Tribunal (Tax) in WM Morrison Supermarkets PLC v HMRC.

The First-tier Tribunal had held that Nakd and Organix bars were “confectionery” and therefore outside the scope of zero-rating provisions for VAT.

Valentina Sloane KC was instructed by Deloitte to act for Morrison Supermarkets PLC in its appeal to the Upper Tribunal.

The Upper Tribunal accepted the arguments that the First-tier Tribunal had made errors of law and that they were material. It remitted the case for a fresh hearing by a newly constituted panel.

The judgment, which can be viewed here contains a detailed analysis of the test on appeal where the challenge is that the court failed to take into account relevant considerations.

The case has been reported in the Telegraph.

Brendan McGurk wins Academy Schools Procurement Challenge

Judgment in Bromcom Computers Plc v United Learning Trust  [2022] EWHC 3262 (TCC) has been published. The Claimant technology provider was the disappointed bidder in a procurement for the award of a contract for the supply of a Cloud Management Information System to the Defendant, the largest Multi-Academy Trust in the UK. Following a split trial on liability and causation, Mr Justice Waksman allowed the Claimant’s claim finding that the Defendant had committed four separate sets of breaches (encompassing several individual breaches) of procurement law, concluding that had the procurement been conducted in accordance with the published criteria, the Claimant would have won by a significant margin.

The decision is not only important within the education sector, but raises a number of interesting questions of procurement law. In particular:

  1. The Defendant opted not to award scores from 0 to 5, as the ITT had indicated it would, but instead calculated final scores on an aggregated and averaged basis, taking all individual evaluator’s scores, and calculating the average for each quality criteria, leading to scores of, for example, 4.2, rather than 4. The ‘averaging’ approach replaced a proper moderation process and led to erroneous scores remaining within the final scores, rather than being weeded out pursuant to a proper moderation. It further meant that the Defendant Authority could not identify its own reasons (as distinct from individual evaluator’s reasons) for the scores awarded. The Court found that the use of an averaging method, together with the absence of any proper moderation or reasons, was contrary to procurement law.
  1. The Court also found that it was unlawful for the winning bidder to have submitted its final tender by way of a drop-box to which the winning bidder continued to have access, both after submitting its final tender, and after the deadline for final tenders had passed. Submitting a final tender by way of attachments to an email or via a secure portal hosted by the Authority would allow the exact time and date of receipt to be determined compatibly with Regulation 22(16) of the PCR. Use of a drop-box would not.
  1. An important issue also arose as to whether the winning bidder could offer, as part of its price bid, a discount on a separate contract that it had already entered into with the same Authority for the provision of the same Cloud services in respect of a number of the Authority’s schools that fell outside the scope of this procurement. The Court agreed with Bromcom that seeking to leverage its incumbency as a supplier of those services to other schools within the Trust violated procurement law. The Court found that the Defendant Authority also allowed the winning bidder to benefit from its incumbency in relation to that other contract in other ways when scoring the bidders’ bids.
  1. The Court further found that individual evaluators between them made no less than 10 manifestly erroneous scoring errors in the scoring of the quality responses.

Being a damages claim, the Court considered what the outcome would have been in a counterfactual in which the Defendant complied with its own award criteria and procurement law, finding that Bromcom would have been awarded the contract. In that regard, the Court rejected the novel contention that since some of the calls that took place between Bromcom and the Defendant authority were recorded without the consent of the Defendant, that Bromcom had committed ‘grave professional misconduct’ that would have led to Bromcom’s disqualification in any event. Mr Justice Waksman both rejected the contention that this amounted to grave professional misconduct and found that the Authority would not have disqualified Bromcom on this basis even if it had been aware that a very small number of calls had been recorded purely for note-taking purposes.

The litigation now proceeds to a trial on quantum later in 2023.

Brendan McGurk successfully acted for Bromcom, instructed by JMW Solicitors LLP.

Robert Palmer KC and Clíodhna Kelleher succeed for the IMA in significant judicial review of EU citizens’ rights in the UK

The High Court has today handed down judgment in R (Independent Monitoring Authority for the Citizens’ Rights Agreements) v Secretary of State for the Home Department, a challenge to the arrangements made by the UK in implementing its obligations under the UK-EU Withdrawal Agreement, the UK-EEA EFTA Separation Agreement.

The IMA is the post-Brexit citizens’ rights watchdog, established in accordance with the Agreements to monitor and protect the rights of EU citizens and EEA EFTA nationals and their family members in the UK. This is the first case brought by the IMA as a claimant in its own right.

Under the Home Office’s EU Settlement Scheme (the EUSS), EU citizens and other qualified applicants who had been granted “pre-settled status” (i.e., limited leave to remain) are required to make a second application to “upgrade” their pre-settled status to “settled status” (i.e., a right of permanent residence in the UK), failing which they will be considered unlawful overstayers, liable to detention and removal and losing the right to live, work, rent and receive social security support in the UK.

Granting the IMA’s claim for judicial review, the High Court determined that these arrangements are unlawful:

  • The grant of limited leave to remain to individuals who apply successfully under the EUSS does not give effect to their rights under the Withdrawal Agreement, the Separation Agreement or the Swiss Citizens’ Rights Agreement because the limitations on leave inherent in that status are a constraint on the residence rights conferred under the Agreements. This is contrary to Articles 13(4) WA, 12(4) SA and 12(3) SCRA which provide that no limitations may be imposed on the residence rights conferred under the Agreements except as provided for in the Agreements.
  • The right of permanent residence under the Agreements accrues automatically to an individual who makes an initial successful application under the EUSS and resides in the UK for the requisite five years. The Secretary of State accordingly cannot require an individual to make a second application for status, or withdraw a right of residence beyond five years based on a failure by an applicant to make a second application for status.

Mr Justice Lane determined that these matters are acte clair and did not require a reference to the CJEU.

The IMA’s application for judicial review was supported by interventions from the European Commission and from the3million.

The IMA has previously published its Statement of Facts and Grounds and skeleton argument for hearing.

Robert Palmer KC and Clíodhna Kelleher were instructed by the IMA.

The case has been reported in the press:

The Guardian

Sky News

BBC

Philip Moser KC wins permission to appeal Braceurself judgment on “sufficiently serious breach”

Decision of Alexander Nissen KC, sitting as a Deputy High Court Judge, 7 December 2022 (unrep.)

Braceurself Ltd v NHS England [2022] EWHC 2348 (TCC) was a decision on an alternative claim in damages for breach of the procurement regulations (“the Damages Judgment”) in a case where the TCC had earlier decided to lift the automatic suspension on contract-making ([2019] EWHC 3873 (TCC)) and the contract had accordingly been awarded to another party.

In a judgment on liability, [2022] EWHC 1532 (TCC), the TCC found that the contracting authority had committed a manifest error of assessment in its scoring of Braceurself’s tender and that, absent that error, Braceurself’s tender would have won.

In the Damages Judgment the TCC found that Braceurself had however not suffered “sufficiently serious” damage to be entitled to a Francovich award of damages, there having been a single error which had been excusable and inadvertent. This was the first such judgment in which a breach that had led to an award to the wrong bidder was considered insufficiently serious to merit an award of damages.

Braceurself instructed Philip Moser KC of Monckton Chambers for the appeal.

In a decision following a hearing on 7 December 2022, Alexander Nissen KC, sitting as a Deputy High Court Judge, has granted Braceurself permission to appeal the Damages Judgment to the Court of Appeal on the question of whether the breach was sufficiently serious on Francovich principles so that the claimant was entitled to damages.

Philip Moser KC is acting for the Claimant Braceurself Limited.

Ronit Kreisberger KC and Julian Gregory involved in new opt-out collective proceedings claim against Google

A new opt-out collective proceedings claim has been brought against Google in the Competition Appeal Tribunal on behalf of publishers that sell advertising on their websites – from large news organisations to individuals who host advertising on their blogs.

Different users may be shown different ads when viewing the same webpage, and the sale of display ads typically takes place through online auctions run in the fraction of a second between when a user clicks to open a webpage and the webpage content opens.  Advertisers bid in the light of what is known about the relevant user, such as their purchase or browsing history.

The technology used to manage this process is known as ‘ad tech’.  The claim alleges that Google has abused its dominant position in ad tech markets, by engaging in unlawful self-preferencing.  Specifically, the claim alleges that Google’s publisher ad server, which manages the sale process on behalf of publishers, treated its own ad exchange, which runs the auctions, more favourably than rival ad exchanges, and vice versa.

The claims are standalone (rather than follow-on), but the allegations of abuse heavily overlap with findings made by the French Competition Authority in an infringement decision of 7 June 2021.  In addition, many of the allegations are supported by findings made by the CMA in its online platforms and digital advertising report.

The claims seek damages of up to £13.2bn to compensate a class of claimants estimated to be as large as 130,000.

Ronit Kreisberger KC and Julian Gregory are representing Mr Claudio Pollack, the Proposed Class Representative, a former Ofcom director.

They are instructed by litigation specialists Humphries Kerstetter. Also instructed are Geradin Partners, a specialist competition law practice, and Charles River Associates, both of which have extensive experience in ad tech markets from their involvement in the UK and French investigations. The claim is funded by Harbour.

Press releases from Humphries Kerstetter and Geradin Partners are available here and here.

 

Gerry Facenna KC leading on claim against Facebook over ‘surveillance advertising’

Meta, the owner of Facebook, is facing a claim in the UK High Court that Facebook’s model of “surveillance advertising” breaches the right to object under Article 21 of the UK General Data Protection Regulation (“UK GDPR”). The claimant Tanya O’Carroll is an independent expert and tech campaigner and is seeking to establish that users of Facebook and other social media platforms have the right to use those services while being able to opt out of being profiled and having their personal information used for targeted advertising.

Gerry Facenna KC is leading on the claim for Tanya O’Carroll, instructed by the law firm and digital rights agency AWO. The claim is supported by the Global philanthropic organisation Luminate.

The case has been reported in the national and international press:
The Guardian
Bloomberg UK
Forbes
The Times here and here

New opt-out class action claims against water and sewerage companies

Following recent publicity regarding unlawful discharges of untreated sewage and wastewater into waterways like rivers, streams, and coastal waters, Jon Turner KC, Julian Gregory and Antonia Fitzpatrick are working to prepare opt-out collective proceedings claims to be brought in the CAT against water and sewerage companies in England.

As well as providing individual compensation and justice, opt-out proceedings act as a deterrent to future misconduct. As the Supreme Court stated in Merricks, such claims serve “efficiency and justice by ensuring that actual and potential wrongdoers modify their behaviour to take full account of the harm they are causing”.

Each water and sewerage company in England is a monopolist in its local area, and the claims will contend that certain systematic failures relating to sewerage discharges which resulted in increased charges to customers constitute a breach of their dominant position contrary to section 18 of the Competition Act 1998.

The claims will be the first UK collective proceedings claims with a strong environmental rationale and impact.

Jon, Julian and Antonia are working with Leigh Day (see their press release here), Alix Partners and legal finance experts Bench Walk.

Professor Roberts, a water resource management specialist, is the proposed class representative, and Professor Hammond, who has been at the forefront of attempts to hold the water and sewerage companies to account for unlawful spills, is acting as a consultant.