Criminal


Drug trafficking - failure to disclose - fresh evidence - gross misconduct - informers - prosecution disclosure

R v Vernett-Showers & 10 ors: CA (Crim Div) (Lord Justice Hooper, Mr Justice Gibbs, Mr Justice Roderick Evans): 18 July 2007

The court was required to determine conjoined appeals against convictions for drug smuggling offences arising from the controlled delivery of heroin into the UK from Pakistan.



The appeals had been listed together because all but one had involved the same participating informant in operations run by Revenue & Customs.



The common issues were whether there was material that ought to have been disclosed at trial to undermine the prosecution case or support the defence case that might reasonably have affected the jury's decision to convict, or whether there was fresh evidence that might have done so; whether there had been gross misconduct by those investigating the case or presenting it in court.



Held, the paradigm-controlled delivery in R v Choudhery (Mohammed Ashraf) [2005] EWCA Crim 1788 did not have the status of a guideline or benchmark against which controlled deliveries should be judged, Choudhery considered. The absence of a particular feature did no more than raise suspicion about the particular controlled delivery under examination. In particular, it would not be genuine if the drug supplier knew that the delivery was under the control of Revenue & Customs, or if the participating informant was the supplier. The fact that the participating informant in the present cases had carried out many controlled deliveries increased the risk that sellers in the later transactions had known that he was an informant, so that the transactions should be treated with caution, but the large quantity of drug smuggling transactions between the UK and Pakistan made it more likely that genuine transactions could be carried out by the same informant.



In the case of Vernett-Showers, Sabir and Ahmed, they had not alleged at trial that they had been set up, and the evidence that it was a genuine transaction was overwhelming. There had been no breach of the prosecution's disclosure obligation. Although the initial prosecution statements had not revealed as much as they could have revealed, the absence of detail was far from amounting to gross prosecutorial behaviour. The security of the participating informant and the security of other operations might well justify a certain reticence or coyness, provided that there was compliance with the obligation of disclosure in the light of the facts of the case and the defence being put forward. Their appeals were dismissed.



In Beg's case, neither singly nor cumulatively did the omitted detail go anywhere near showing that his conviction to supply was unsafe. Beg's appeal was dismissed.



Prior to the cross-examination of the informant in Khan's case, the prosecution had not known the precise nature of his defence and could not be criticised for failing to disclose matters that could support his defence. In any event, there was nothing in the undisclosed material that might have affected the jury's decision to convict Khan and Ryan, whose appeals would be dismissed, R v Pendleton (Donald) [2001] UKHL 66, [2002] 1 WLR 72 applied.



In the case of Masud, the prosecution case that it was a genuine importation of heroin was strongly supported by evidence that the jury heard. However, post-trial disclosure had revealed detail of the background of which the defence had been largely ignorant. If the material subsequently disclosed had been available at trial, the verdict of the jury might reasonably have been affected. Musad's appeal was allowed.



In Mumtaz Ahmed's case, there had been legitimate reasons for not disclosing details of the genesis of the operation, and any non-disclosure had not affected the safety of his conviction. His appeal was dismissed.



The Crown agreed that the appeals of Nisar Ahmed and Rizwan Ahmed should be allowed due to material non-disclosure of the involvement of two of the genitors of two previous operations. The Crown agreed that Ramzan's appeal should be allowed.



The disclosed material had omitted information that one of the men involved in the drug transaction had been aware of the identity of the informant and that the importation was to be a controlled delivery.



Judgment accordingly.



D Friedman for the first, second, fourth and 11th appellants; I Shafi for the third and fifth appellants; R Brander for the sixth, seventh, eighth, ninth and tenth appellants. All defence counsel instructed by Osmani & Co except counsel for the fifth appellant, who was instructed by Keith Dyson & Co; Andrew Bird, J Ashley-Norman (instructed by the Revenue & Customs solicitor) for the Crown.





Property



Bankruptcy - consent orders - matrimonial property - postponement - sale of property - trustees in bankruptcy

Vivienne Joan Avis v (1) Charles Hamilton Turner (trustee in bankruptcy of the property of Edmund Charles Avis) (2) Edmund Charles Avis: CA (Civ Div) (Lords Justice Ward, Chadwick, May): 19 July 2007
The appellant (J) appealed against an order for the sale of her former matrimonial home made on an application by the first respondent trustee in bankruptcy (T) of her former husband, the second respondent (C).



In matrimonial proceedings, it had been ordered by consent that the trusts upon which J and C had formerly held the matrimonial home be varied to provide that the proceeds of sale be held as to two-thirds for J and as to one-third for C. The order provided that the sale be postponed until the happening of specified events, and that J should have the exclusive right to occupy the property until a sale. T applied for an order for the sale of the property pursuant to the Trusts of Land and Appointment of Trustees Act 1996 and the Insolvency Act 1986. J and C opposed the order. J relied on section 283(5) of the 1986 Act and maintained that T took C's interest in the property subject to the rights conferred on her by the order.



The judge held that section 335A(3) of the 1986 Act was applicable and, therefore, the court was required to assume the interests of the bankrupt's creditors outweighed all other considerations, unless the circumstances of the case were exceptional. The judge held that J's rights were qualified rights, so no question arose of those rights being violated by an order for sale, nor did any questions arise of T purporting to take the property comprised in C's estate otherwise than subject to J's rights.



The issue that arose was whether, having regard to the terms of the order and the provisions of section 6(6) of the 1996 Act, it was open to a court as a matter of jurisdiction to make an order for sale of the property in the exercise of powers conferred by section 14(2)(a) of that Act.



Held, unless the order had some special force that went beyond the agreement of the parties as reflected in that order, any arguments based on section 283(5) had to be rejected.



The restriction in section 6(6) of the 1996 Act applied only to the powers conferred by that section and did not apply to powers to postpone sale conferred by section 4(1) of the 1996 Act or by the original disposition. Section 14(2)(a) of the 1996 Act conferred on the court power to make any such order as it thought fit relating to the exercise by trustees of any of their functions. That enabled the court to direct trustees to execute the trust for sale or to direct trustees to concur in a decision that they would no longer exercise their power to postpone sale. But in neither case would the court be directing trustees to exercise a power conferred by section 6 of the 1996 Act.



The restriction in section 6(6) had no application in such a case. Therefore, notwithstanding the terms of the consent order, an order made under section 14(2)(a) directing J and C to sell the property could not be said to be inconsistent with the restriction in section 6(6). Further, absent a statutory restriction, section 14(2)(a) enabled the court to override the need for consent of any person. Accordingly, it would have been open to the court, on an application made by C under section 14 of the 1996 Act, if he had not been adjudged bankrupt, to make an order for the sale of the property. It was immaterial in that context that on an application by C, the court may have decided, as a matter of discretion, it would not order a sale.



It followed that it was open to the court to make an order for sale on an application made by T under section 14. If an application was properly made under section 14, then section 335A of the 1986 Act applied. Section 335A(1), read with section 15(4) of the 1996 Act, required that, in deciding whether to make the order sought, the court had to have regard to matters in section 335A(2) and to the mandatory terms of section 335A(3).



The judge had been right to hold that the rights conferred on J by the order were always subject to the possibility that the court might make an order for sale. The agreement recorded in the order did not, of itself, confer on J an absolute right that the property remain unsold unless and until one or other of the specified events had occurred. J's right to resist a sale was qualified by the right of the other person interested in the property. The presentation of T's application did not raise any question of T purporting to take property comprised in C's estate otherwise than subject to J's rights. T's application should proceed to a hearing on the merits where the court would need to determine whether the circumstances of the case were exceptional so as to displace the statutory presumption under section 335A(3).



Appeal dismissed.



Paul Chaisty QC, Graham Sellers (instructed by Maxwell Hodge) for the appellant; Stephen Davies QC, Stefan Ramel (instructed by Eversheds) for the first respondent; no appearance or representation for the second respondent.





Damages



Compound interest - interest - jurisdiction - mistake of law - restitution - unjust enrichment

Sempra Metals Ltd (formerly Metallgesellschaft Ltd) v (1) Inland Revenue Commissioners (2) HM Attorney-General: HL (Lord Hope of Craighead, Lord Nicholls of Birkenhead, Lord Scott of Foscote, Lord Walker of Gestingthorpe, Lord Mance): 18 July 2007
The appellant Revenue appealed against a decision ([2005] EWCA Civ 389, [2006] QB 37) that the respondent company (S) was entitled to interest for the loss of use of money on a compound basis. S had paid advance corporation tax in respect of certain dividends prematurely. The premature payment of such tax gave rise to a breach of Community law. S's claim was in restitution, it being alleged that the money had been paid under a mistake. In essence, its claim was for the time value of the money paid prematurely.



The Revenue argued that the calculation of the award due to S should be effected on the basis of simple, rather than compound, interest; that if compound interest was to be used, the conventional rate of interest should be calculated by reference to the rate at which the government could have borrowed money during the relevant period.



(Lords Scott and Mance dissenting in part) Held, it could now be taken as settled that, under the principle in Kleinwort Benson Ltd v Lincoln City Council [1999] 2 AC 349, a cause of action at common law was available for money paid under a mistake of law, Kleinwort Benson considered. The time had also now come to recognise that the court had jurisdiction at common law to award compound interest where the claimant sought a restitutionary remedy for the time value of money paid under a mistake, Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669 distinguished. As to the basis of the award, the remedy of restitution differed from that of damages: it was the gain that needed to be measured, not the loss to the claimant. The Revenue therefore had to give back to S the whole of the benefit of the enrichment that it had obtained. Money had a value, and the measure of the right to subtraction of the enrichment that resulted from its receipt did not depend on proof by S of what the Revenue had actually done with it. It was the opportunity to turn the money to account during the period of the enrichment that passed from S to the Revenue. Computation of the time value of the enrichment on the basis of simple interest would inevitably fall short of its true value; the compounding of interest was the basis on which the restitutionary award due to S should be calculated.



It was open to the recipient to demonstrate that there had been no actual enrichment when the money fell into his hands notwithstanding the opportunity to turn it to account. But the Revenue's case was not that it did not use the money at all, but rather that the benefit that it had received was extremely difficult to quantify. In those circumstances, resort would be had to a conventional rate of interest as the measure of the benefit. As to how the rate was to be arrived at and what rests should be adopted, the enrichment principle indicated that those questions should be resolved by looking at the circumstances of the enrichee. The Revenue had sufficiently demonstrated that the conventional rate should be calculated by reference to the rates of interest and other terms applicable to borrowing by the government in the market during the relevant period.



The court had a common law jurisdiction to award interest, simple and compound, as damages on claims for the non-payment of debts as well as on other claims for breach of contract and in tort.



(Per Lords Scott and Mance) If any claim to restitution was to be recognised in relation to the use of money had and received, at common law or in equity, it had to refer to any actual benefit obtained by the recipient.



Appeal dismissed.



Ian Glick QC, Rupert Baldry, Gerry Facenna (instructed by the Revenue & Customs solicitor) for the appellants; Laurence Rabinowitz QC, Francis Fitzpatrick, Steven Elliott (instructed by Slaughter & May) for the respondent.





Civil Procedure



Anti-suit injunctions - corporate insolvency - foreign proceedings - jurisdiction clauses - stay of proceedings

(1) AWB Geneva SA (2) Pioneer Metal Logistics Co Ltd BVI v (1) North America Steamships Ltd (2) Wolrige Mahon Ltd: CA (Civ Div) (Lords Justice Chadwick, Latham, Thomas): 18 July 2007
The appellant companies (P) appealed against a decision ([2007] EWHC 1167 (Comm)) staying their claim for declaratory relief, and sought permission to appeal against the refusal to grant an anti-suit injunction to restrain Canadian proceedings.



P had entered into forward freight swap contracts for 2006 and 2007 with a Canadian company (N) on terms governed by the International Swaps and Derivatives Association master agreement. The swap contracts contained English law and exclusive jurisdiction clauses. N had entered into the swaps because it believed that the market rate would decline over the term of the contracts but rates had increased significantly and, as a result, N became insolvent before the end of 2006.



Since then, the market rate had moved in N's favour with the result that P would owe money to N under the 2007 swaps. P took the view that they were not liable to make any payment under the 2007 swaps because events of default had occurred as a result of N's failure to pay and its bankruptcy.



N's trustee in bankruptcy disagreed and had affirmed the swaps. The trustee then filed a petition under the Companies' Creditors Arrangement Act of Canada seeking, among other things, an order prohibiting P from relying on insolvency defaults under the various swaps which constituted receivables of N.



P sought an anti-suit injunction from the English court to restrain the trustee's proceedings and a declaration that events of default had occurred. The judge refused an injunction and stayed the claim for a declaration.



P submitted that the relief sought in the Canadian proceedings amounted to an attempt to re-write the contractual obligations in the swap contracts and therefore fell within the jurisdiction clause. The trustee submitted that the judge had been right that there was no point in the Commercial Court hearing the claim for a declaration as to the meaning of the swaps until after the Canadian court had declined to make the proposed initial draft order or final order in the Canadian proceedings.



Held, if the proceedings in Canada were proceedings which related to a dispute under the contract, then that would be characterised as a contractual issue and subject to the exclusive jurisdiction clause which was wide in its scope. However, that was not the nature of the proceedings in Canada. Those proceedings were part of insolvency proceedings and the issues that arose within them were governed by Canadian law.



The issues encompassed within the insolvency proceedings were wide. It was a matter for the Canadian court to decide on the relief that it was prepared to grant within the scope of those proceedings, as it was concerned with issues of insolvency and not with issues that related to the contractual obligations under the agreements. The application in relation to the exercise of its insolvency jurisdiction was therefore not within the clause.



Whether any relief granted had any effect on the contractual obligations under the swaps was a matter to be determined after the Canadian court had made its decision, as the question of the effectiveness of any order made by the Canadian court was governed by English law as the proper law of the swaps. As the proceedings under the Companies' Creditors Arrangement Act were not within the scope of the jurisdiction clause, the question whether the court should grant an anti-suit injunction did not arise. Permission to appeal on that issue was accordingly refused.



The challenge made by the trustee to the meaning of the swaps involved a contention that certain clauses of the ISDA master agreement were ineffective. The ISDA master agreement was widely used in all types of derivative transactions on the international markets.



The trustee's contentions, if correct, could have ramifications for the financial markets, and the sooner the issues raised were determined the better. It would also be very helpful to the judge considering the trustee's proposal in the Canadian proceedings to have the decision of the Commercial Court on the interpretation of the relevant provisions of the ISDA master agreement.



Therefore, the appeal on that issue should be allowed and the stay lifted to enable the Commercial Court to determine the dispute as to the meaning of the ISDA master agreement.



Appeal allowed.



Ali Malek QC, David Quest (instructed by Reed Smith Richards Butler) for the appellant; Robin Dicker QC, Stephen Robins (instructed by Holman Fenwick & Willan) for the respondents.