Lords Rewrite the Law on Debt Repayment

On 18 July 2007 the House of Lords gave judgment in Sempra Metals Ltd v. HMRC [2007] UKHL 34, the latest instalment in the long running Advance Corporation Tax (‘ACT’) group litigation.  The decision has already been described as having rewritten the law on debt repayment (The Times, 18 July 2007).

Sempra, formerly Metallgesellschaft Ltd., was one of the original claimants in the EC challenge to the UK’s ACT regime, part of which the ECJ held to be contrary to the right of establishment under Article 43 EC.  After the ECJ decision in 2001, five test cases proceeded, in order to resolve various issues arising out of the numerous claims for compensation by foreign companies and UK subsidiaries in respect of premature payments of ACT made between 1973 and 1999.  Four of the test cases have now progressed through the domestic courts and been decided by the House of Lords (Pirelli [2006] UKHL 4; Deutsche Morgan Grenfell [2006] UKHL 49; Boake Allen [2007] UKHL 25 and Sempra).  The fifth case, Test Claimants in Class IV, was referred by the High Court back to the ECJ, which delivered judgment in December 2006.

The appeal in Sempra raised two issues.  The first was the effect of the ECJ’s decision in Metallgesellschaft, on which the Court of Appeal had taken the view that the ECJ decision required the English courts to award compound interest to Sempra, regardless of the position in national law.  The House of Lords unanimously rejected that view, agreeing with the Revenue that the appropriate remedy was a question to be determined by national law, subject only to EC principles of ‘equivalence’ and ‘effectiveness’.

Secondly, the Revenue contended that Sempra had no cause of action in English law by which it could recover compound interest.  On this point, their Lordships sided with Sempra: Lords Hope and Nicholls concluded that there is a right at common law to recover compound interest representing the objective ‘time value of money’ as personal restitutionary relief in a claim for money paid under a mistake of law.  Lords Mance and Walker agreed that compound interest was available, but as an equitable discretionary remedy, rather than as of right at common law.  Lord Scott dissented, taking the view that compound interest could be claimed as damages but that Sempra had no restitutionary claim for interest based on a breach of EC law.  Lord Scott agreed with Lords Hope and Nicholls, however, that such a claim, if it existed, should be as of right at common law, and not available purely as a discretionary equitable remedy.

Their Lordships also disagreed on the appropriate measure of recovery: Lords Mance and Scott dissented from the majority view that recovery should reflect the objective ‘time value of money’, reasoning that Sempra could only recover the interest the Revenue actually earned in the relevant period.  All agreed, however, that a claimant may recover compound interest as damages, and the majority took the view that such a claim is available in all cases of late payment of debts.  On the particular facts of this case, their Lordships also agreed that recovery should be calculated by reference to the government borrowing rate, rather than the higher market borrowing rate contended for by Sempra.

Gerry Facenna is acting as junior counsel for HM Revenue & Customs in two of the five ACT group litigation test cases, Sempra and Pirelli.

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Gerry Facenna



£30m Damages against the Commission

On 12 July the Court of First Instance in Luxembourg awarded over 100 individuals, largely from Britain, substantial damages against the European Commission.  It ordered the Commission to pay almost £30m in relation to two linked sets of claims.

The individual claimants all worked at the EU’s nuclear fusion project (JET) based at Culham in Oxfordshire but they were not given the status of European employees.  Therefore they were denied the pay, pension rights and other benefits of the EU employees who worked alongside them carrying out the same functions on one of the largest scientific projects in Europe.  After a 7 year legal battle, involving three hearings in Luxembourg, the Court of First Instance first found that the Commission had committed “serious misconduct” by practising “long-term discrimination” against the claimants, and then fixed the amount of damages that each claimant can recover.

Two group actions were brought on behalf of over 100 contractors.  One group was represented by Peter Roth QC, Ian Hutton and Ben Lask, the other by Daniel Beard, all of Monckton Chambers.

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Daniel Beard QC
Ben Lask

CFI Rejects Bouygues State Aid Challenge

The Court of First Instance (CFI) rejected a state aid challenge by Bouygues, one of the mobile phone operators in France, on 4th July 2007 against a decision of the European Commission which had found that the grant of 3G licences in France to France Telecom and SFR involved no aid.

France had retrospectively reduced the price of the 3G licences acquired by France Telecom and SFR to match the lower price subsequently paid by Bouygues when Bouygues was subsequently awarded the third 3G licence.  The CFI concluded that this price reduction afforded France Telecom and SFR no advantage and so involved no state aid.  In reaching its conclusion the CFI relied on the Community legislation setting out the manner in which 3G licences were to be awarded by the Member States.

Christopher Vajda QC who was instructed by the Paris office of Denton Wilde Sapte, acted on behalf of SFR, the number two mobile operator in France.



House of Lords Gives Judgment in Lonsdale v Howard & Hallam

The House of Lords delivered its judgment in the test case on commercial agents’ compensation under Regulation 17 of the Commercial Agents (Council Directive) Regulations 1993 on 4th July 2007.

The House of Lords (Lord Hoffmann giving the lead Opinion, with the other members concurring) upheld the Court of Appeal’s approach that compensation is to be assessed by way of a business valuation of the value of the agency to the agent at the date of termination. He clarified that courts should presume a hypothetical buyer and a hypothetical open-market sale, but that otherwise the actual value should be assessed.

The House of Lords expressly disapproved of the approach in the Scottish Outer House of the Court of Sessions case King v Tunnock and also declined to make a reference to the European Court of Justice.

Philip Moser of Monckton Chambers acted for Lonsdale on behalf of Amicus.

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Philip Moser QC



Alzheimer’s Patients Fight New Rules on Drug Availibility

At the end of June hearings took place in R(EISAI) and Alzheimer’s Society v NICE.

The case concerns a challenge to guidance issued by the National Institute for Health and Clinical Excellence (“NICE”) which restricts the availability of drugs which serve to inhibit the symptoms of Alzheimer’s Disease. This is the first time NICE is being challenged.

Previously, the drugs had been available to patients with mild or moderate Alzheimer’s Disease.  The effect of the new guidance issued by NICE was to restrict availability to patients suffering from mild Alzheimer’s Disease.  The companies which manufactured the drugs and the Alzheimer’s Society argued that the Guidance was unlawful for a range of reasons, including a breach of the requirements of the Race Relations Act 1976. Judgment is expected on 10 August.

Tim Ward and Gerry Facenna acted for the Alzheimer’s Society.

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Tim Ward QC
Gerry Facenna

ECJ Ruling in £3 billion Hutchison 3G VAT Case

C-369/04: Hutchison 3G & C-284/04: T-Mobile Austria

A ruling by the ECJ on 26th June means that Revenue and Customs will not have to pay a VAT claim for over £3 billion brought by the winners of the third generation mobile phone spectrum auction in 2000.

The mobile phone companies had claimed that the £27 billion paid by them for spectrum licences included £3 billion VAT, which they were entitled to reclaim.  However, the ECJ today ruled that the UK’s allocation of spectrum was not “economic activity” and hence was not subject to VAT.

The judgment will come as a relief not just to the UK but also to many other Member States, including Germany, the Netherlands, Ireland and Spain, where similar auctions were conducted and similar VAT claims made by the winners; a case from Austria on the same point was the subject of a parallel ECJ judgment today.

Barristers from Monckton Chambers acted on each side in this case: the mobile phone companies were represented by Paul Lasok QC, and Revenue and Customs by Christopher Vajda QC and George Peretz.

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Paul Lasok QC
George Peretz

Arriva Found Not Dominant

The High Court gave judgment in the case of Chester City Council v. Arriva plc.  Arriva was accused of predatory pricing and flooding the market for local bus services in central Chester, in breach of Chapter II of the Competition Act.

Arriva defeated Chester City Council on every point, including by demonstrating that Arriva was not dominant on the relevant market.  The Court held that the relevant geographic market was to be measured using bus drive time isochrones and that the correct metric for assessing market share was bus capacity.  Permission to appeal was denied.

Paul Harris appeared on behalf of Arriva as Junior Counsel.

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Paul Harris QC



High Court Damages Ruling in Hit-and-Run Case

The High Court has held that the United Kingdom’s arrangements for compensating the victims of untraced drivers do not comply with European Community law in requiring compensation claims made on behalf of minors to be brought within three years of injury.  The Court also found that the breach of EC law was sufficiently serious to expose the Secretary of State to a claim in damages.

The judgment arose out of a claim brought on behalf of Ben Byrne, who was injured by an untraced driver when he was three years old.  Later, his parents learnt of the possibility of claiming compensation, and made a claim to the Motor Insurers Bureau,which provides compensation to the victims of untraced drivers under the terms of an agreement with the Department of Transport.  But the MIB refused to process Ben’s application because of a rule in the agreement requiring all claims to be brought within three years of the injury.  This rule was harsher than the provisions of the Limitation Act governing claims against traced drivers; under the Limitation Act, the three year time limit only starts to run when a minor reaches 18.

In legal proceedings brought on Ben’s behalf against the MIB and the Secretary of State for Transport, the High Court found that this was contrary to the EC Directive governing claims by victims of untraced drivers because it did not protect claims by minors against the MIB as effectively as the Limitation Act rules applicable to actions in court by minors who are the victims of traced drivers.

The High Court rejected Ben’s claim against the MIB, holding that the MIB was not an emanation of the State and that the Directive was therefore not directly effective against it; and that the agreement between the MIB and the Secretary of State could not be construed so as to comply with the Directive.

However, the High Court held that the United Kingdom was in sufficiently serious breach of the Directive to expose it to a claim for damages under the principle laid down in the Francovich line of case-law.  Ben can therefore proceed with his claim against the Secretary of State for Transport, seeking damages for the loss he has suffered in being deprived of the possibility of obtaining compensation from the MIB.

Nicholas Paines QC and Josh Holmes represented Ben Byrne.

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Josh Holmes

Judicial Review of the Coal Authority Fails

The Administrative Court has rejected a claim by Abbey Mine to quash a decision of the Coal Authority to grant a licence to Corus, the steel maker, to mine coal in the Margam area of South Wales.  The Court had to consider how to apply the public law principle of fairness in the context of a comparative evaluation of competing bids.  Among the arguments it rejected was that fairness dictated that the decision maker should disclose a number of documents to Abbey Mine.  A competition law attack was also made on the Coal Authority.  This also failed.  Of particular interest was the Court’s rejection of an argument that, because of the royalty payments received from its licensing functions, the Coal Authority was an undertaking for the purposes of competition law.

Christopher Vajda QC and Josh Holmes, instructed by Nabarro, acted for the Coal Authority.

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Josh Holmes

“Best Chambers” and “Best Barrister” Finalist at the Lawyer Awards 2007

We are delighted that Monckton Chambers has been nominated as ‘Chambers of the Year’ and Peter Roth QC has been shortlisted as ‘Barrister of the Year’ as part of The Lawyer Awards 2007.  It is great to have been chosen among hundreds of entries.  The winners will be announced on 26th June 2007 at an award ceremony at The Grosvenor House Hotel.

Paul Lasok QC, Head of Chambers says: “We are very pleased with this news, especially as this year saw a tough panel of judges including some of the biggest names in the City.”

We would like to take this opportunity to thank our clients for their continuous support.