Employment


Compromise agreements - expenses - payments - repudiation - termination of employment - warranties

Sean Mervyn Collidge v Freeport Plc: QBD (Mr Justice Jack): 25 May 2007

The claimant (C) claimed payments from the defendant company (F) under a compromise agreement.



C had founded a retail outlet company (F) and had been its chief executive and chairman. After a board meeting at which allegations made against C were considered, F and C agreed by letter on terms for the termination of C's employment. Under the agreement, F's obligation to pay was subject to, and conditional on, the terms that included a warranty by C that there were no circumstances of which he was aware, or which he ought to have been aware, that might constitute a repudiatory breach on his part of his contract of employment and that would entitle or would have entitled F to terminate his employment without notice.



However, before payment to C of the sum due under the compromise agreement, F informed C that it was continuing investigation of certain matters that, in the absence of explanation, showed C to be in breach of the warranty. C indicated that he was unaware of any investigation, and sought payment under the agreement.



C contended that the warranty clause of the agreement had not been a contingent condition in the sense that its performance was a pre-condition of the enforceability of the agreement or to the enforceability of its payment provision, but that if it had been any sort of pre-condition, the condition had been met by the giving of the warranty.



F contended that it was not liable to make any payment to C where there had existed at the date of the agreement circumstances entitling F to dismiss C summarily. F alleged that C had used a company driver to do private work for C in company time, had misused his company credit card, had claimed personal expenses as company expenses, had wrongfully claimed mileage allowance and petrol costs, and had wrongfully removed equipment from one of F's sites to a hotel owned by C.



Held, on the proper interpretation of the agreement, it had been a condition of the obligation to pay that the facts were as they were warranted. That was plainly the sense of 'conditional' in the introductory words to the obligation to pay.



Accordingly, if the facts were not as set out in the warranty clause, F was under no obligation to pay.



Where expenses were obtained by an employee that were not properly the expenses of the company, whether by using a company credit card and failing to reimburse, or by claiming them as company expenses, there would commonly be two aspects to be considered in respect of summary dismissal. One was whether a particular expense had been obtained dishonestly, the other whether there had been a pattern of behaviour, or one or two instances. No more latitude should be given to a company director than should be given to a more lowly employee such as a salesman, but rather the reverse, for a director should set a standard for his employees. Each case would turn on its own facts.



In the present case, C had removed items from F's site as alleged, had used a driver for private work on occasions, and had dishonestly obtained expenses from F a number of times which, taken together, would have justified his summary dismissal. C had habitually abused his ability to obtain expenses from F. That amounted to a repudiation of his contract and had entitled F to dismiss him summarily. Applying the warranty clause, there had been numerous circumstances of which C had been aware that constituted repudiatory breaches on his part and that would have entitled F to terminate his employment without notice. It followed that C was not entitled to benefits under the agreement.



Judgment for defendant.



David Reade (instructed by Mayer Brown Rowe & Maw) for the claimant; Paul Nicholls (instructed by Dechert) for the defendant.





Landlord and Tenant



Council tax - possession orders - rent arrears - secure tenancies - obligation to give up possession of property - cessation of exercisability of right-to-buy application

Islington London Borough Council v Manelva Honeygan-green (sued as M Honeygan): QBD (Mr Justice Nelson): 25 May 2007
The appellant local authority appealed against a decision ordering it to convey the long lease of a property to the respondent (H) in accordance with her right-to-buy application.



H, who was a secure tenant of the local authority, had made an application to buy the property. H was late in paying her rent on the property on several occasions during the tenancy and a notice was served seeking possession. The local authority obtained a possession order, suspended subject to full payment of the rent arrears. H again failed to pay her rent and the local authority informed her that that breach of the suspended possession order meant that she had forfeited her secure tenancy, had become a tolerated trespasser and was, in the circumstances, no longer able to exercise the right to buy.



H then paid off her arrears and the possession order was discharged. Subsequently, H again fell into arrears with her rent and further possession proceedings were issued.



In her counterclaim, H applied for, and was granted, a mandatory injunction ordering the local authority to convey the lease of the property to her in accordance with her original right-to-buy application. The local authority submitted that the judge had erred in granting the injunction. The right to buy, it argued, could only be established by a particular claim being made and admitted in accordance with the procedure laid down in the Housing Act 1985. If the right to buy could not be exercised pursuant to section 121 of the Act because the tenant was obliged to give up possession, then the application that established that right to buy must cease to be exercisable.



The local authority further submitted that policy reasons required a strict interpretation of section 121, as Parliament could not have intended a tenant who did not pay rent the benefit of an earlier application and hence what might be a more favourable purchase price if the housing market was rising.



Held, the local authority's interpretation of section 121 of the Act was correct. H was obliged to give up possession of her property in pursuance of the order obtained by the local authority. Indeed, her tenancy was terminated by the order. At that time, the right to buy that she had claimed could not be exercised. That was the clear intention of the statute. H's right to buy, as established by her original application, ceased to be exercisable, Enfield LBC v McKeon [1986] 1 WLR 1007 applied. Further, the application establishing the right to buy could not be revived by the revival of the tenancy, Bristol City Council v Lovell [1998] 1 WLR 446 applied. H defaulted on her own obligations as a tenant and failed to respect the terms on which she was relieved from the immediate consequences of that default. If she had retained all her privileges as a tenant, including her application of the right to buy, she would have done so at the expense of other tenants who paid their rent. The local authority would be obliged, in spite of her default, to permit her to obtain the property at less than the relevant market value. It was doubtful that Parliament intended section 121 to have that effect.



H, at the time of the hearing of her counterclaim for a mandatory injunction, had failed to pay the rent due from her as a tenant under her revived tenancy for a period of much longer than four weeks after it had been lawfully demanded from her. Under section 138(2) of the Act, until the whole of that payment had been made, the landlord was not bound to comply with section 138(1). It was not therefore under the duty to grant the lease and hence that duty could not be enforceable by injunction at that stage.



Appeal allowed.



Iain Colville (instructed by the local authority solicitor) for the appellant; Adrian Jack (instructed by Wilson Barca) for the respondent.





Housing



Homelessness - local housing authorities' powers and duties - refusal - residential accommodation - offer of permanent accommodation

Omar v Birmingham City Council: CA (Civ Div) (Sir Andrew Morritt (Chancellor), Lords Justice May, Lloyd-Jacob): 7 June 2007
The appellant (O) appealed against a decision that the respondent local authority had discharged its duty under section 193 of the Housing Act 1996 as he had refused an offer of suitable accommodation.



O applied for housing as a homeless person. The local authority accepted that O was homeless and that it was under a duty to provide accommodation under section 193 of the Act.



An offer of permanent accommodation was made. The offer letter stated that only one offer of suitable permanent accommodation would be made and warned of the consequences of refusal. O refused the offer on the basis that the accommodation was unsuitable. The local authority informed O that it had discharged its duty under section 193 as the accommodation was suitable.



The decision was upheld on review and O's appeal dismissed. O contended that, as the offer of accommodation was a final offer of permanent accommodation under part VI of the Act, for the local authority to cease to owe a duty it had to comply with the terms of section 193(7)(a) and specifically state the consequences of refusal of such an offer.



Held, the explicit reference in the letter, to the fact that it was a final offer of permanent accommodation, could only mean that it was an offer of accommodation under part VI. The mere addition of the words would have told O nothing useful; he only needed to know that the accommodation was suitable and the consequences of refusal, Slater v Lewisham LBC [2006] EWCA Civ 394, [2006] 2 FCR 90 applied. Whilst section 193(7)(a) was in mandatory terms, there was no need slavishly to follow the form of words; it was only necessary to convey the point. In the present case, the letter conveyed everything to O. Even if that was wrong, the judge had been right to hold that O's refusal of accommodation came within the terms of section 193(5).



Appeal dismissed.



Zia Nabi for the appellant; Catherine Rowlands for the respondent.





Administrative Law



Discretionary powers - financial advisers - Financial Ombudsman Service - judicial review - jurisdiction - mis-selling - statutory powers - ombudsman's power to direct redress payment of over £100,000- enforceability

Roger Bunney v (1) Burns Anderson Plc (2) Financial Ombudsman Service Ltd; Jeremiah James Cahill v Timothy James & Partners Ltd: ChD (Mr Justice Lewison): 25 May 2007
The court was required to determine in conjoined cases whether it was appropriate to grant the applicants' injunctions to enforce directions made by the Financial Services Ombudsman.The ombudsman had made a direction in the case of the applicant Bunney that the first respondent financial advisers (B) had given Bunney unsuitable advice and should carry out a loss assessment. If loss was shown, it should make a redress.



Their loss assessment showed the loss to be £228,055, while Bunney's assessment showed it to be £280,953. B were willing to pay only £100,000. The ombudsman had made a direction in the case of the applicant Cahill that the respondent financial advisers (T) had given Cahill unsuitable advice and that it should pay him whatever shortfall he had suffered and set up an annuity to replace the benefits that he would have enjoyed. Cahill's quantification of the effect of the direction was that T would have to pay a sum of £157,936 to make up the shortfall and pay over £1,800,000 to set up an annuity. T were willing to pay Cahill only £100,000.



The applicants applied under section 229(9) of the Financial Services and Markets Act 2000 for injunctions to enforce the ombudsman's directions. Issues arose as to whether, where the ombudsman made a direction which, if implemented, would require a firm to pay a complaining customer more than £100,000, that was outside the ambit of the ombudsman's powers; if it was, whether the firm could make that assertion in enforcement proceedings, or whether it was confined to an application for judicial review; or whether it was appropriate to enforce the ombudsman's directions.



The applicants contended that the ombudsman's powers under section 229(2) were cumulative rather than alternative, and that he did have power under section 229(2)(b) to make a direction the effect of which would be to require a firm to pay money, and that power was not limited by the statutory cap, which only applied to a money award under section 229(2)(a); once an award made by the ombudsman had become final and binding, the only way of challenging it was by judicial review under part 54 of the Civil Procedure Rules. B and T contended that the ombudsman had no power under section 229(2)(b) to make a direction that required them to pay money to the applicants, and that his only power to require the payment of money arose under section 229(2)(a). They contended in the alternative that any power under section 229(2)(b) to require the payment of money was limited to a payment of £100,000.



Held, whether a determination was a money award or a direction depended on the substance of the decision and not on the form in which it was expressed. If the determination required the payment of money to an individual complaining to the ombudsman or for his benefit, it was a money award, even if the amount was unquantified at the time of the award. The ombudsman did not have power to make a direction that would require a firm to make a payment that would exceed the statutory cap. If the cost of compliance with a direction was unknown at the time the direction was made, it was subject to an implicit limitation that it would not be enforceable beyond the statutory cap, once reached.



It was clear from the authorities that there was no longer any difference in principle between a challenge based on substantive invalidity and one based on procedural invalidity; where a defendant to a claim wished to challenge a public law decision as part of his defence, the court did not have any discretion to refuse to allow him to do so, unless the raising of the defence was an abuse of process or it had no reasonable prospect of success; it would have no reasonable prospect of success if, as a matter of construction of the statute under which the impugned act was done, the legislation forbade any challenge to be made otherwise than by judicial review; in construing statutory schemes that enabled decisions to be made under them, there was a strong presumption, based on the importance of the rule of law, against concluding that the only permissible means of challenge was by judicial review, O'Reilly v Mackman [1983] 2 AC 237, Wandsworth LBC v Winder (No1) [1985] AC 461, Clark v University of Lincolnshire and Humberside [2000] 1 WLR 1988 and Rhondda Cynon Taff CBC v Watkins [2003] EWCA Civ 129, [2003] 1 WLR 1864 considered.



Accordingly, there was a strong presumption, based on the rule of law, that a citizen's right to defend himself against an unfounded claim was not to be taken away except by clear words. The words of the Act were not clear enough to remove that presumption. It was therefore open to the respondents to question in the present proceedings whether the ombudsman had formal jurisdiction to make the determinations that he had purported to make.



The fact that the Act said that a direction was enforceable by injunction did not change the discretionary nature of the remedy. In a case in which the ombudsman had exceeded his powers, it was not right for the court to exercise its discretion in favour of a party who had the benefit of a direction; what was enforceable by an injunction was a valid direction, not an invalid one. The ombudsman's direction in respect of Bunney was not for the payment of money; it was to carry out a loss assessment and to make redress, which could have taken a number of forms. Therefore, the grant of an injunction against B would serve no useful purpose. The direction in respect of Cahill was to make a money payment. However, T had agreed to pay £100,000 and to the extent that the direction required them to pay more than that it was unenforceable.



Applications refused.



Nicholas Randall (instructed by Thompsons) for the applicant Bunney; John Virgo (instructed by Clarke Willmott) for the applicant Cahill; Andrew Bartlett QC, Simon Howarth (instructed by CMS Cameron McKenna) for the respondents Burns Anderson plc and Timothy James & Partners Ltd; James Strachan (instructed by the in-house solicitor) for the respondent, Financial Ombudsman Service Ltd.





Insurance



Compensation - direct effect - Motor Insurers Bureau - personal injury - principle of equivalence - time limits - untraced drivers

Ben Byrne (a child by his litigation friend, Julie Byrne) v (1) Motor Insurers Bureau (2) Secretary of State for Transport: QBD (Mr Justice Flaux): 5 June 2007
On a trial of preliminary issues, it fell to be determined whether the 1972 Untraced Drivers Agreement between the Department of Transport and the Motor Insurers Bureau (MIB) complied with the provisions of article 1(4) of Directive 84/5.



The claimant (B) had been injured when he was aged three by a car in a hit-and-run incident involving a driver who was never traced. It appeared that B's parents only became aware of the possibility of claiming compensation for his injuries from the MIB some eight years later.



The MIB rejected B's claim, relying on the three-year time limit for making a claim contained in clause 1(1)(f) of the agreement. B then issued proceedings claiming damages for breach by the MIB of the agreement as it should properly be interpreted in accordance with community law, alternatively for breach of statutory duty arising out of community law directly applicable to the MIB.



In the alternative, B made a claim against the secretary of state for damages for breach of statutory duty in failing properly to implement article 1(4) of the directive. B contended that the protection for victims of untraced drivers under the regime contemplated by article 1(4) had to be as effective as that which the relevant national legal system would give in the case of a victim of a driver who was backed by valid motor insurance, and that the three-year time limit for all applications under the agreement failed to provide the equivalent protection required because it precluded any application made more than three years after the accident, whereas a claim in tort in court proceedings against an insured driver could be brought by B at any time prior to his 21st birthday because of the operation of section 28 of the Limitation Act 1980.



Held, the community interest reflected in the directive would not be adequately achieved unless the victim of an uninsured driver could obtain from the national body set up under article 1(4) protection equivalent to the protection he would obtain in the national court if he brought a claim in tort or delict against an insured driver, and the European Court of Justice had ruled that the protection provided by the national scheme under article 1(4) in respect of the victims of uninsured or untraced drivers had to be equivalent to, and as effective as, the protection available under the national legal system to victims of insured drivers, Evans v Secretary of State for the Environment, Transport and the Regions (C63/01) [2005] All ER (EC) 763 applied.



By reason of the time limit, the agreement did not provide such equivalent protection to someone in B's position. A claim in tort was a 'similar domestic action' for the purposes of comparison with the claim against the MIB, Preston v Wolverhampton Healthcare NHS Trust (No2) [2001] UKHL 5, [2001] 2 AC 455 applied. The MIB procedure involved less favourable treatment of victims than a claim in tort before the English courts by reason of the time limit. Community law required the MIB procedure to be subject to a limitation period no less favourable than the limit in tort proceedings under section 28.



The principle that domestic legislation was to be interpreted, so far as possible, in conformity with community obligations did not apply to a private law agreement such as the agreement, Marleasing SA v La Comercial Internacional de Alimentacion SA (C106/89) [1990] ECR I-4135 considered, White (Brian) v White [1999] 1 CMLR 1251 applied. The time limit was not a fundamental feature of the agreement and if the principle of conforming interpretation had applied, the agreement could have been rewritten in the manner for which B contended.



B had no right of direct action against the MIB for breach of the directive. The directive was capable of having direct effect, Riksskatteverket v Gharehveran (C441/99) [2001] ECR I-7687 applied. However, the MIB was not an emanation of the state: although it performed a public service, it was not under state control and did not have the required special powers, Foster v British Gas Plc (C188/89) [1991] 1 QB 405 applied.



The lack of thoroughness in failing to check the agreement for compliance with the directive at the time of implementation, and the failure to check the entire agreement for compliance after the judgment in Evans, meant that the department's breach of the directive was sufficiently serious to give rise in principle to an exposure to liability for Francovich damages.



Preliminary issues determined in favour of claimant.



Nicholas Paines QC, Josh Holmes (instructed by Pinto Potts) for the claimant; Dermod O'Brien QC, Fergus Randolph (instructed by Greenwoods) for the first defendant; Jonathan Crow QC, Jemima Stratford, David Barr (instructed by the Treasury Solicitor) for the second defendant.





Insolvency



Admissibility - bankruptcy - conspiracy to defraud - directors' powers and duties - discharge - disclosure - fraud - privity

(1) Malcolm Shierson (2) Jonathan Birch v Viren Kumar Rastogi (a bankrupt): ChD (bankruptcy court) (Sir Andrew Morritt, Chancellor): 25 May 2007
The appellant trustees in bankruptcy (T) appealed against a decision of the registrar not to suspend the running of the bankruptcy period pursuant to section 279(3) of the Insolvency Act 1986 for the respondent bankrupt (R).



R was the director of a company. A petition for its compulsory winding-up was made and its liquidators obtained a worldwide freezing order against R. As required by the order, he swore an affidavit disclosing his personal assets, including information about trusts he had set up. The liquidators brought proceedings against R in respect of alleged fraudulent breaches of his duty of trust to the company and its financiers, and judgment was given against him for $307,463,954.



The company successfully petitioned for R's bankruptcy based on his failure to satisfy the judgment, and T were appointed. R was interviewed under section 333 of the Act and charged with an offence of conspiracy to defraud. He was due to be discharged from his bankruptcy at the expiration of one year from the date of the original order, but T applied under section 279(3) to suspend the running of that period on the basis that R had failed and was continuing to fail to comply with his obligations under part IX of the Act, on the grounds that he had failed to explain or account for the disparity between the amount of the judgment and the value of the assets disclosed by him; and to disclose or account for the proceeds of sale of certain shares and his beneficial interest in certain trusts.



The application was dismissed on the grounds that the judgment against R was inadmissible to prove the fraud at the root of T's complaints, and that there was insufficient evidence in respect of the shares and trusts. T submitted that the registrar had been wrong to hold that the judgment against R was inadmissible and that his other conclusions had been infected by that error.



Held, where there was a significant degree of identification between two parties, it was just to hold that the decision to which one was a party should be binding in proceedings to which the other was a party, Gleeson v J Wippell & Co Ltd [1977] 1 WLR 510 applied. Such a principle evidently applied to proceedings between the company and R, and between the company and T. In the circumstances, it was also applicable to proceedings between R and T, International Brands USA Inc v Goldstein [2005] EWHC 1293, [2006] 1 BCLC 294 and Singla (Brown's trustee in bankruptcy) v Brown [2007] EWHC 405 (Ch) applied. T were to be considered the privies of R and were bound by the judgment against him. Further, the judgment was admissible and conclusive between T and R as to the latter's participation in a fraud, Secretary of State for Trade and Industry v Bairstow [2003] EWCA Civ 321, [2004] Ch 1 distinguished.



Accordingly, T had succeeded in establishing that R had failed to explain or account for the disparity between the amount of the judgment and the value of the assets disclosed by him.



R was under a duty to provide full details about his financial affairs under part IX of the Act. He had once held the relevant shares, but had failed to give consistent answers in the various interviews and witness statements as to the amount for which the shares were sold, and who received the purchase price. He had also failed to clear up the confusion over who held the beneficial interests in the trusts he had set up, which again amounted to a failure to provide full details of his financial affairs.



There remained substantial failures by R to comply with his obligations under part IX. Therefore, he should not be freed from the disabilities to which an undischarged bankrupt was subject, and it was ordered that the period of one year prescribed by section 279(1) of the Act would not expire until a period of a year from the conclusion of the criminal proceedings against him had elapsed.



Appeal allowed.



Stephen Smith QC, Clive H Jones (instructed by Holman Fenwick & Willan) for the appellants; Charles Purle QC (instructed by Bivonas Ltd) for the respondent