COMPANY

Directors - distribution - dividends - knowledge - shareholders

It's a Wrap (UK) Ltd (In liquidation) v Gula and anor: CA (Civ Div) (Lords Justice Chadwick and Sedley, Lady Justice Arden): 11 May 2006



The appellant company (W) appealed against the decision ([2005] EWHC 2015 (Ch)) that the respondents (G) were not liable to repay dividends that they had paid to themselves when the company had had no profits out of which it could lawfully have paid the dividends.


In the relevant years, W had made trading losses. Despite the fact that there were no profits out of which to pay dividends, G, as the shareholders and directors of W, had caused W to pay them substantial dividends in contravention of section 263 of the Companies Act 1985. W brought proceedings for return of the dividends, relying on section 277(1) of the 1985 Act, which implemented article 16 of the Second Council Directive 77/91 and provided a statutory remedy against a shareholder for recovery of an unlawful distribution paid to him if he knew, or had reasonable grounds to believe, that it had been made in contravention of the Act.


G's case was that the dividends described as such in the company's accounts had been paid as salary and shown as dividends as a tax-efficient method of drawing the salaries, which was normal practice for small businesses and had been done on the advice of an accountant. The judge held that section 277(1) required G to know that they were contravening the Act when they paid the dividends and that, since they were ignorant of its provisions, they were not liable to repay the dividends. G submitted that a shareholder had to have knowledge of the requirement of the Act that the distribution contravened.


Jane Giret QC, Stephen Tudway (instructed by Sprecher Grier Halberstam) for the appellant; Stephen Robins (pro bono) for the respondents.


Held, section 277(1) had to be interpreted in accordance with article 16 of the directive, which provided that any distribution made contrary to article 15 had to be returned by shareholders who received it if the company proved that the shareholders knew of the irregularity of the distribution or could not have been unaware of it.


A person was taken to know the content of community law as soon as it was published in the Official Journal (Case 161/88 - Friedrich Binder GmbH & Co KG v Hauptzollamt Bad Reichenhall [1989] ECR 2415, applied). Accordingly, the right approach to the interpretation of article 16 was to proceed on the basis that, when implemented, the general presumption that ignorance of the law was no defence would apply unless, on the true interpretation of the directive, it was excluded. On its true interpretation, article 16 meant that a shareholder was liable to return a distribution if he knew, or could not have been unaware, that it was paid in circumstances that amounted to a contravention of the restrictions on distributions in the directive, whether or not he knew of those restrictions. The expression 'the irregularity' of the distributions referred to the fact that they had been made contrary to article15. It followed that all the company had to show was that the shareholders knew the facts constituting the contravention.


In the instant case, since G had been aware that the company had no profits, they knew that the distributions had been made in contravention of the Act for the purposes of section 277(1).


Appeal allowed. For related proceedings see Case 161/88 - Friedrich Binder GmbH & Co KG v Hauptzollamt Bad Reichenhall [1989] ECR 2415.





EMPLOYMENT


Air crew - airlines - conduct - contract terms - employees rights - retirement age - transfer of undertakings - unfair dismissal

(1) Michael Bartlett Cross (2) Carole Gibson v British Airways plc: CA (Civ Div) (Lords Justice Auld, Laws and Richards): 11 May 2006


The appellant former employees (C and G) appealed against a decision upholding the dismissal by an employment tribunal of their claims against the respondent employer (BA) for unfair dismissal under section 94 of the Employment Rights Act 1996.


C and G were flying crew who had both been required by BA to retire at the age of 55, so they had both been effectively dismissed. C and G had previously been employed as flying crew with another company, British Caledonian Airways (BCal). With BCal their contractual retiring age was 60, and that was also their 'normal retiring age' for the purposes of section 109 of the Act, so that they lost the right not to be unfairly dismissed after that age.


BCal's assets and business were transferred to BA in 1988 pursuant to the Transfer of Undertakings (Protection of Employment) Regulations 1981. C and G's contracts of employment were transferred pursuant to regulation 5 of the regulations. BA had had a rule for more than 30 years requiring its flying crew to retire at 55. C and G had both accepted the contractual terms offered to them by BA, which provided for retirement at age 55.


It was common ground that, but for the 1981 regulations, C and G would have had a normal retiring age with BA of 55, therefore they would not have been able to claim unfair dismissal. The tribunal and the Employment Appeal Tribunal had held that the statutory normal retiring age was not a right capable of being transferred under the regulations.


The issues for determination in the instant case were whether the statutory normal retiring age was transferable under the regulations, and, if so, the circumstances in which post-transfer conduct by employees with a 'transferred' normal retiring age might result in a substitution of a different statutory normal retiring age. C and G submitted that the transfer of undertakings 'froze' the BCal normal retiring age on and after their transfer to BA. They argued that the regulations should be interpreted broadly so as to govern the section 109 normal retiring age as well as the contractual retiring age. They further argued that to comply with Council Directive 77/187 and the jurisprudence of the European Court of Justice, the courts should construe regulation 5 of the regulations so that pre-transfer contractual retiring age preserved, post-transfer, any pre-transfer normal retiring age.


BA, while agreeing that a contractual retiring age was transferable, contended that regulation 5 did not operate to transfer as a contractual, or other entitlement, any employee's pre-transfer normal retiring age. BA also contended that, even if C and G's new contractual retirement dates had been transfer-related so as to engage the rule in Foreningen af Arbejdsledere i Danmark v Daddy's Dance Hall A/S (C324/86) [1988] ECR 739, namely that an employee may not waive rights conferred on him by the provisions of the directive, even if the disadvantages from such waiver would be offset by benefits, subsequent events amounting to implied variation independent of the transfer had broken that link.


Robin Allen QC (instructed by Charles Russell) for the appellants; Nicholas Underhill QC, Bruce Carr (instructed by Stevens & Bolton) for the respondent.


Held, C and G's submissions did not meet the point that an employee's contractual rights under his pre-transfer contract of employment could not define or 'freeze' his pre-transfer normal retiring age so as to transfer it along with his pre-transfer contractual rights. The normal retiring age under section 109 was conceptually different from a contractual retirement date. A normal retiring age fell to be determined by reference to the facts at the time of dismissal, not at the time of transfer. Therefore, the presumption that a contractual retirement age applicable to all, or nearly all, the employees in a group was the normal retiring age for the group was necessarily rebuttable. The normal retiring age was objective, since it was identified by reference not only to the facts as they might affect the individual employee, but to all others in the same position (Waite v Government Communications Headquarters [1983] ICR 653 and Barclays Bank plc v O'Brien and ors [1995] 1 All ER 438, considered).


The normal retiring age at any given time was subject to change, pre and post-transfer. It was not something that was capable of being 'frozen' as at the moment of transfer. All that was transferred was a general law right not to be unfairly dismissed before reaching normal retirement age, whatever that age might be at the time of dismissal.


(Obiter) It had been open to the tribunal to find, as a matter of law and fact, that in the case of C and G there had not been any post-transfer contractual or other conduct bearing on their normal retiring age that could be regarded as independent of the transfer so as to enable BA, if it had lost on the main issue in the case, to defeat their claim for transfer of their BCal normal retiring age (Daddy's Dance Hall and Martin v South Bank University (C4/01) (2004) 1 CMLR 15, considered). Appeals dismissed.





POLICE


Anti-social behaviour - dispersal - interpretation - police powers and duties - reasonable force - removal

R (on the application of W by his parent and litigation friend PW) (claimant) v (1) Commissioner of Police for the Metropolis (2) Richmond-Upon-Thames London Borough Council (defendants) and Secretary of State for the Home Department (interested party): CA (Civ Div) (Sir Igor Judge (President QB), Lords Justice May and Wall): 11 May 2006


The appellants, the commissioner of police and secretary of state, appealed against a decision ([2005] EWHC 1586; [2005] 1 WLR 3706) that the power of a police officer to 'remove' a person younger than 16 years old to his place of residence, pursuant to section 30(6) of the Anti-social Behaviour Act 2003, was permissive and not coercive.


Police officers had been authorised to exercise the powers conferred by section 30(3) to (6) of the Act in respect of a designated area close to where the respondent (W) lived with his parents. W had been in the local town centre dispersal area when he was confronted by a community police officer who told him about the effect of the police's powers to issue dispersal directions. W was distressed by the event and his family objected to the constraints that this fear imposed on the way he lived his life.


He sought judicial review of the authorisation given to police officers to remove persons younger than 16 from the designated area and that challenge was upheld. The issues for determination were whether section 30(6) authorised the use of reasonable force and the ambit of the use of such force.


Javan Herberg, Victoria Windle (instructed by Liberty) for the claimant; Sam Grodzinski (instructed by the force solicitor) for the first defendant and (instructed by the local authority solicitor) for the second defendant; Timothy Otty (instructed by the Treasury solicitor) for the interested party.


Held, section 30(6) did carry with it a coercive power. In its context, the word 'remove' naturally and compellingly meant 'take away using reasonable force if necessary'. That was not a matter of implication, but one of meaning. If the word 'remove' did not have that meaning, the power under section 30(6) would, in its context, be meaningless.


In the context of a power given to constables, 'remove' denoted the use of reasonable coercion, if that was necessary. That meaning applied as much to section 30(6) as it did to section 46 of the Children Act 1989 and sections 15 and 16 of the Crime and Disorder Act 1998, where the power to 'remove' was also coercive. Furthermore, the fact that the power was given to both constables and to community support officers, whose training and other powers were more limited, did not call for a more limited meaning.


A constable exercising the power given by section 30(6) was not free to act arbitrarily. He was not free to act for a purpose other than that for which the power was conferred. The purpose for which the power was conferred was clear and largely uncontentious. It was to protect children younger than the age of 16 within a designated dispersal area at night from the physical and social risks of anti-social behaviour by others.


Another purpose was to prevent children from themselves participating in anti-social behaviour within a designated area at night. It did not confer an arbitrary power to remove children who were not involved in, or at risk of exposure to, actual or imminently anticipated anti-social behaviour. It did not confer a power to remove children simply because they were in a designated area at night. In the context of the 2003 Act, children were free to go into such an area without fear of being removed provided that they did not participate in anti-social behaviour and that they avoided others who were behaving anti-socially.


Furthermore, the commissioner had accepted that, to act reasonably, constables must have regard to all the relevant circumstances. Therefore, it followed that section 30(6) did not have the type of curfew effect about which W complained (R (on the application of Gillan) v Commissioner of Police for the Metropolis [2006] 2 WLR 537, considered). Appeal allowed.