Weekly Digest: 21 October 2019

The appellants are the executors of Mrs Beryl Coulter, who died in Jersey on 9 October 2007, leaving her residuary estate on trust for charitable purposes (the “Coulter Trust”). The appellants were domiciled in Jersey and the will specified that the trust was to be governed by Jersey law. The estate included substantial assets in the United Kingdom.

In October 2010, the appellants retired as trustees (but not as executors) and were replaced by a UK resident trustee. The will was amended to make the proper law of the Coulter Trust the law of England and Wales. In 2014, the Coulter Trust was registered as a charity under English law.

In 2013, Her Majesty’s Revenue and Customs (“HMRC”) determined that Mrs Coulter’s gift to the Coulter Trust did not qualify for the relief from inheritance tax in respect of gifts to charities provided by section 23 of the Inheritance Tax Act 1984. This was because section 23 limited relief to trusts governed by the law of a part of the United Kingdom, the Coulter Trust was governed by the law of Jersey at the date of Mrs Coulter’s death, and Jersey was not a part of the United Kingdom for the purposes of section 23.

The appellants appealed against HMRC’s determination on the basis it is incompatible with article 56 of the Treaty Establishing the European Community (“EC”) (now article 63 of the Treaty on the Functioning of the European Union (“TFEU”)), which prohibits restrictions on the free movement of capital between EU member states, and between member states and third countries. HMRC argues that article 56 does not apply here because a movement of capital between the United Kingdom and Jersey should be regarded as an internal transaction taking place within a single member state. The Court of Appeal accepted the appellants’ submission that Jersey is to be regarded as a third country for the purposes of article 56, but decided that the restriction of section 23 to trusts governed by the law of part of the United Kingdom was nevertheless justifiable under EU law.

The issues arising in this further appeal are: (1) whether a movement of capital between the United Kingdom and Jersey should be regarded as an internal transaction taking place within a single member state for the purposes of article 56; and (2) if not, whether the refusal of relief under section 23 in respect of the gift to the Coulter Trust is justifiable under EU law.

The Supreme Court unanimously allowed the appeal.

Article 56 prohibits all restrictions on payments or the movement of capital between member states, and between member states and third countries. It is common ground between the parties that article 56 applies to gifts to charities and that Jersey is not a member state. The issue therefore turns on whether Jersey is to be regarded as a third country [7].

The Bailiwick of Jersey is a Crown Dependency which, along with the other Channel Islands, enjoys a unique relationship with the United Kingdom through the Crown [8]. Jersey is not an independent state in international law; the UK government is responsible for its international relations and has the power to extend to Jersey the operation of a treaty concluded by the United Kingdom [10]. Article 29 of the Vienna Convention on the Law of Treaties 1969 provides that a treaty is binding upon each party in respect of its entire territory unless a different intention is expressed [11]. Article 299(1) EC (now article 355 TFEU) makes express provision for the territorial scope of EU law [13]. Protocol 3 to the Treaty of Accession 1972 provides that the free movement of goods applies to the Channel Islands [14]. However, other rules of EU law do not apply in Jersey, including the EU rules on free movement of capital [15].

Decisions of the Court of Justice of the European Union (the “CJEU”) provide a systematic and consistent approach to this issue. The question of whether a territory is to be regarded as a third country is context-specific and will depend on whether, under the relevant Treaty of Accession and supplementary measures, the relevant provisions of EU law apply to that territory [35]. The decision of Prunus SARL v Directeur des services fiscaux (Case C-384/09) [2011] I-ECR 3319, in which the CJEU held that the British Virgin Islands were to be treated as third countries, is determinative of the issue in the present case [36]. Jersey is to be considered a third country for the purpose of a transfer of capital from the United Kingdom [37].

Accordingly, EU rules on the free movement of capital do apply to transfers of capital between the United Kingdom and Jersey, and it is accepted that the refusal of relief under section 23 is a restriction on that free movement. The remaining question is therefore whether the restriction is justifiable under EU law [38].

On its face, section 23 does not impose any restriction on the free movement of capital and is therefore compliant with article 56 [50]. The only restriction is that imposed by the judicial gloss placed on the words now found in section 989 of the Income Tax Act 2007 by the House of Lords in Camille and Henry Dreyfus Foundation Inc v Inland Revenue Comrs [1956] AC 39 (“Dreyfus”) a restriction which, when incorporated into section 23, has the effect of confining relief under that provision to trusts governed by the law of a part of the United Kingdom and subject to the jurisdiction of the UK courts. There can be no doubt that the Dreyfus gloss on section 989, as applied to section 23, is incompatible with article 56. It is plain that the restriction of relief from inheritance tax to trusts governed by the law of a part of the United Kingdom cannot be justified under EU law [51]. Article 56 is directly applicable and must be given effect in priority to inconsistent national law, whether judicial or legislative in origin. The Dreyfus gloss on section 989 cannot be applied to section 23 in situations falling within the scope of article 56. Since it is undisputed that the Coulter Trust satisfied the conditions at the time, it follows that it qualifies for the relief [52].

The appellant was appointed a District Judge by the Lord Chancellor with effect from 6 February 2006. The letter offering her appointment specified the duration, salary, pension and conditions of employment, including as to sitting days, sick pay, maternity leave and conduct. By an Instrument of Appointment the Lord Chancellor approved her to sit at county courts on the Wales and Chester circuit.

Major cost cutting reforms took place after 2010. The appellant raised a number of concerns relating to the cuts. She claims that the handling of her complaints led to a severe degradation in her health, resulting in psychiatric injury and disability.

In February 2015 she made a two-part claim in the Employment Tribunal, both of which depended on her being a ‘worker’ within the meaning of section 230(3) of the 1996 Act. Her claim for disability discrimination under the Equality Act 2010 is proceeding, as it is accepted that she is a worker for the purpose of European Union law, from which this claim is derived. Her claim under Part IVA of the 1996 Act is not so derived, and the Employment Tribunal determined as a preliminary issue that she was not a ‘worker’ under domestic law for the purpose of the whistle-blowing provisions. It accepted that she therefore had no protection against the infringement of her right to freedom of expression under article 10 ECHR, but that it was not possible to give effect to section 230(3) so as to give her that protection. Her appeals to the Employment Appeal Tribunal and to the Court of Appeal were dismissed.

The Supreme Court unanimously allowed the appeal and remitted the case to the Employment Tribunal on the basis that the appellant is entitled to claim the protection of Part IVA of the 1996 Act.

The appellant argued that she was a ‘limb (b)’ worker under the definition in s 230(3) of the 1996 Act [2-3]. The issue was whether the appellant’s work is performed pursuant to a contract with the recipient of that work or services, or pursuant to some different legal arrangement. Judges hold a statutory office, and office-holders do not necessarily hold office pursuant to a contract [12]. It depends on the intention of the parties, which is reflected in the manner of engagement, the source and character of the rules governing service and the overall context [16]. In the appellant’s case, the essential components of the relationship are derived from statute and not a matter for negotiation; it is difficult to identify her employer; and the separation of powers is a factor against a contract between a Minister of the Crown and a member of the judiciary. Taken together, these factors do not suggest a contractual relationship [17-21].

Nor are judges in Crown employment. They are not civil servants or the equivalent of civil servants. They do not work under or for the purposes of the functions of the Lord Chief Justice, but for the administration of justice in accordance with their oaths of office [22-25].

The imposition of detriments, such as the bullying, victimisation and failure to take complaints seriously which the appellant alleges, would be an interference with her right to freedom of speech under article 10 ECHR [26]. A claim under the Human Rights Act 1998 (‘the HRA’) would not enable the appellant to seek the wider relief that a worker could under Part IVA of the 1996 Act [27, 30]. The failure to extend the Part IVA protections to judicial office-holders is a violation of the appellant’s right under article 14 not to be discriminated against in her enjoyment of the rights under the ECHR: (i) the facts of her case are within the ambit of article 10; (ii) she has been treated less favourably than other employees and workers who make responsible public interest disclosures; (iii) her occupational classification is clearly a ‘status’ within the meaning of article 14; and (iv) exclusion of judges is not a proportionate means of achieving a legitimate aim. There is no evidence that either the executive or Parliament addressed their minds to the exclusion of the judiciary from the protection of Part IVA and no legitimate aim has been put forward [28-37].

The remedy for the incompatibility of the exclusion of the judiciary from the protection of Part IVA of the 1996 Act with the rights under the ECHR is found in the obligation on the courts in section 3 of the HRA to read and give effect to primary legislation in a way which is compatible with those rights. It has been established that it is possible to interpret the definition of a ‘limb (b)’ worker to include judicial office-holders when required to do so by EU law, and it would not ‘go against the grain’ of the 1996 Act to do so in respect of the protections of Part IVA. This interpretation should also apply to the equivalent provisions in the Employment Rights (Northern Ireland) Order 1996 [39-45]. Accordingly the appeal was allowed and the case remitted to the Employment Tribunal on the basis that the appellant is entitled to claim the protection of Part IVA of the 1996 Act [46]

On 24 May 2016 the police commenced an investigation into suspected offences of money laundering. One of those under suspicion and subject to the investigation was the respondent, S. On 29 August 2018 a Crown Court judge made an all assets Restraint Order against S and certain companies and other persons connected with him. However, the judge discharged that Restraint Order on 23 July 2019. She did so pursuant to s.42(7) of the Proceeds of Crime Act 2002, on the basis that proceedings for the alleged offence had not been started within a reasonable time. The Crown Prosecution Service sought to appeal, pursuant to s.43(2) of the 2002 Act, against the judge’s decision to discharge the Restraint Order.

The appeal was allowed. The judge misapplied the statutory provisions; did not take into account a material consideration; and took into account an immaterial consideration. [76]

The judge had directed herself that the test was whether the time taken to charge (or not charge) was reasonable. That was correct. She further directed herself that what is a reasonable time must depend on the circumstances. That was correct too. But unfortunately the judge did not stop there. For, as her reasoning in paragraph 21 of the ruling shows, she evidently considered that there was a requirement to act “as rapidly as possible” where an all assets Restraint Order such as this was in place. But the words “as rapidly as possible” are not there in the statute. [68]

The Court further considered that the judge’s reasoning was in any event flawed by its failure to engage with the points made about the prosecutor’s obligations as to investigation and disclosure prior to charge. In particular, whilst she records the submissions made as to disclosure and preparation, she nowhere makes findings in that respect or indicates how, if at all, such points – which clearly were material – were evaluated by her. [70]

The obligations of disclosure and the need to prepare proper schedules of unused material prior to charge are fully set out in the various Codes and Guidelines and the need for early preparation has been confirmed in previous decisions. It is not right, to criticise the Crown Prosecution Service and police for in effect doing trial preparation at the pre-trial (pre-charge) stage. To the contrary, front-loading disclosure in a case such as this is the recommended procedure, in order to avoid disruption and delay in the management of proceedings once started. Moreover, these considerations also have to be put in the context of the fact that there were here a number of suspects under investigation. For obvious reasons, there was a requirement to consider the investigation and potential proceedings as a whole. It would be wrong to consider the position solely by reference to S himself. Thus whether the prosecution was in a position, in evidential terms, to make a charging decision with regard to S (if it was) was not of itself determinative of the issue of reasonableness: the position of the other suspects and the position with regard to overall disclosure also had to be borne in mind. In general terms, therefore, to proceed to charge should involve being ready, within reason, thereafter to pursue with reasonable expedition the ensuing proceedings. Assessment of a reasonable time within which to start such proceedings ordinarily should allow for that. [71] In these respects, it is not altogether clear what findings, if any, the judge actually made. [72]

The Court was also troubled by the judge’s reference to what the consequences might be if the Restraint Order were discharged. Those matters were not relevant because the sole issue was whether or not proceedings had been started within a reasonable time. If they had not been then the court was required to (“must”) discharge the restraint order; and consideration of any consequences, desirable or otherwise, arising from discharge then fell away. [74]

Given the flaws in the judge’s reasoning, the Court was not persuaded that her conclusion (reached in July 2019) was nevertheless inevitably right. It held that a period of some 11 months (and 8 ½ months from delivery of the files) does not seem obviously unreasonable, in circumstances where the case was complex, where there were numerous suspects and where, on any view, there were significant disclosure issues to be addressed. But when the Court heard this appeal it was October 2019 and a charging decision still had not been made. Nor had there been provided, as there should have been, a progress report in August 2019. [80] In such circumstances, remittal would serve no purpose. A progress report was ordered to be filed, and the court commented that if there continues to be no real and positive movement towards a charging decision identified in the progress report and if “continued vague and bland generalisations as to charging are given”, a fresh application to discharge can be made and/or the judge can proceed under s.41(7B). [81]

On 27 October 2015 Mr Canning applied to the CCRC for a review of his conviction in 1995 and its referral to the Appeal Court. On 18 May 1995, at the Crown Court at Newcastle Upon Tyne, Mr Canning was convicted of one count of keeping for sale a number of peregrine falcons (count 1) and six counts of selling peregrine falcons (counts 2 to 7). In each case, the relevant activity was said to amount to a breach of Article 6 of EEC Regulation 3626/82 and Regulation 3(1) of the Control of Trade in Endangered Species (Enforcement) Regulations 1985. Mr Canning was sentenced to 18 months’ imprisonment concurrently in respect of each count.

The Court refused permission to proceed with judicial review.

Mr Canning’s main argument was that the convictions are unsafe because they are incorrect as a matter of law. He maintained that the birds that he kept and sold were not peregrine falcons (falco peregrinus) within the meaning of the relevant legislation but rather hybrids. As regards the question of whether in fact the birds in question were hybrids, the CCRC was of the opinion that at the trial (and on the appeal) no issue had been raised that the birds in question did not satisfy the test of being peregrine falcons because they were hybrids. Rather the main battle lines were whether the birds had been bred in captivity (the defence) or taken from the wild (the prosecution case). Although Mr Canning asserted that he had mentioned in his police interview that the birds were hybrids and that his Counsel did not follow his instructions the Court did not consider that the CCRC is wrong in its assessment. [49] The reasons of the CCRC regarding showing the birds in question to be hybrids as a matter of fact cannot be said to be irrational. The CCRC correctly applied the test being whether it was of the view that the case as to hybrids (in fact and in law) had any real possibility of success if argued before the Appeal Court and concluded that it did not. The Court considered that it was entitled to reach that conclusion and the contrary is not sufficiently arguable for the purposes of the grant of permission to proceed with judicial review. [53]

In refusing permission to proceed with the judicial review the Court applied the test summarised in the White Book at paragraph 54.4.2 which, in summary, is that the applicant will need to satisfy the court that there is an arguable ground of review which has a realistic prospect of success. This was a case where Mr Canning disagreed with the conclusion of the CCRC on the merits. It was held that it is not the court’s function to come to its own view on the merits and, if different, to substitute it for that of the CCRC or require the CCRC to reconsider. The Court can only interfere if the process which the CCRC has undertaken to reach its conclusion has gone wrong. Mr Canning had failed to raise an arguable case with a realistic prospect of success that the decision of the CCRC was irrational or “Wednesbury” unreasonable (one that no person properly directed on the law could reasonably reach). [64]

Mikail Arif Jadoon Khan and his brother, Aftaab Arif Khan, were both convicted of fraud and made the subject of confiscation orders pursuant to the Criminal Justice Act 1988. Monies were outstanding pursuant to both brothers’ confiscation orders and accordingly the Crown Prosecution Service (“the CPS”) applied to the High Court for the appointment of an enforcement receiver in respect of a basement flat. The application came before Julian Knowles J on 7 March 2018 when the parties agreed, upon terms, that a receiver should be appointed. Mikail applied to set aside the order of 7 March. He argued that the order should be set aside because he had “made an irrational decision to settle when overwhelmed by the circumstances” and that the CPS purported to enter into an unlawful agreement not to oppose any application by Aftaab for a certificate of inadequacy.

The application was dismissed.

Many people enter into contracts imprudently or even irrationally, but they are not without more to be excused from their bargain. Whatever his physical condition on 7 March 2018, there is no suggestion that Mikail lacked capacity and no argument is put before the court to make good any other vitiating factor arising from either his ill-health or the pressure of being at court and having to make quick decisions as to his case. There is, for example, no suggestion that the CPS procured Mikail’s agreement by misrepresentation, fraud, undue influence or actionable mistake. [22] The assertion that Mikail made an irrational decision when overwhelmed by the circumstances does not, the Court considered, come anywhere close to providing a basis in law for seeking to avoid the contract of compromise or, therefore, for revoking this consent order pursuant to r.3.1(7). [23]

Counsel for Mikail also ordered that while settlement was no doubt expedient, it was wrong for the court to have made an order that tied the CPS’s hands as to its position upon any application that Aftaab might make for a certificate of inadequacy. However, the Court considered that the settlement was effectively on the basis that Aftaab would be able to establish an interest to the extent of £86,183.50 but not in any greater sum. By agreeing not to oppose an application for a certificate of inadequacy, the CPS was implicitly accepting that Aftaab’s interest in the flat was limited to such sum. Construed in that way, there was nothing unlawful in the CPS’s agreeing not to oppose Aftaab’s application pursuant to s.83 upon receipt of that sum. [28]

By the decision the Panel decided not to direct the release of the Claimant, Mark Wells. The Claimant argues that the relevant Panel of the Board (“the Panel”) misdirected itself in law in the Decision (Ground 1) and also committed a number of additional public law errors numbered Grounds 2-4 below.

The Claimant was serving an indeterminate sentence of imprisonment for public protection (IPP) at HMP High Down. That sentence was imposed on 27 September 2005 upon the Claimant’s conviction for the offence of robbery. The Claimant’s history of offending required the imposition of an indeterminate sentence under the law then in force but the sentencing judge set the Claimant’s minimum tariff at only 2 years.

The decision of the Panel was quashed.

Ground 1: Misdirection in Law

The Panel observed in a crucial concluding paragraph that: “You also have not yet built the protective factors which would be key to helping you live an offence free life in the future” (underlining supplied) [23]. The Court considered that it was hard to avoid the conclusion that the Panel misdirected itself in law as to the hurdle which they considered the Claimant had to overcome. Reading this paragraph in the context of those preceding it, the Panel appears to have considered that it had to be satisfied that that there was essentially no risk of reoffending. That could not be correct in law. [24] The Panel’s approach does not faithfully apply the terms of the statute or this important judicial guidance – rather than evaluating whether the Claimant would be “offence free” (effectively, no risk of reoffending), they should have instead assessed whether any potential risk was proportionate with his continued detention. [26] The Court concluded that the first Ground succeeds and that is enough to justify the quashing of the Decision. [28]

Grounds 2 & 4: Irrationality and inadequate reasons

The essential submission was that in light of the evidence the Panel’s conclusion that Mr Well’s risks could not be safely managed in the community was irrational. [29] The Court considered this ground and the Ground 4 challenge (reasons challenge) together. Both the rationality and reasons challenge succeeded. [36] The reasons for this conclusion included, inter alia, that both psychologists assessed the Claimant as presenting a low to moderate risk of future offending and did not consider risk as imminent; a recent OASys assessed that the Claimant presented a medium risk of general and violent reoffending, this was not an increase from previous assessments; the Panel seems to have failed to indicate what conclusion they reached regarding risk, simply stating that they ‘considered that [his] risk of further violence may be underestimated’; there is a lack of a specific conclusion on risk from the Panel itself in this regard; the Panel did not apparently conclude that risk had increased since the previous decision to release; there had been no allegations that he has acted in a violent manner either inside or outside custody since 2014 and the Claimant had not been arrested for committing any violent offences whilst released, despite being unlawfully at large for two months. [37]

Ground 3: Insufficient attention paid to relevant considerations

The arguments under this ground were rejected. The argument that little consideration appeared to have been given to assertions that there is a low level of intellectual functioning and the associated capacity to benefit from mainstream offending behaviour work was rejected. [43] The argument that the Panel failed to place any weight on the fact that the Claimant was willing to wear a tracking device, instead just remarking that a device could just be removed was rejected. The Panel would have been well aware of the fact that removal of a device would not be straightforward and that adverse consequences would follow if the Claimant took such a step. [45] The argument that the Panel placed too little emphasis on the fact that the Claimant had not been arrested nor committed any violent offences during his time in the community, even when unlawfully at large was simply another aspect of the rationality challenge addressed above. [46]

The appellant was convicted of assaulting a police officer in the execution of his duty on 22 February 2018. The Crown Court dismissed his appeal and upheld the conviction on 25 May 2018. The appellant asked the Crown Court to state a case for the opinion of this court. The judge declined and provided reasons for refusing to state a case. The appellant successfully challenged that refusal by judicial review. On 27 March 2019 Andrew Baker J quashed the decision not to state a case and directed that a case be stated raising the following three points of law to be considered by this court: (1) Whether, on the facts found in the Crown Court, PC Millett was acting in the execution of his duty when taking hold of the defendant; (2) whether, upon the evidence before the Crown Court, a prima facie case of self-defence was raised and, if so, whether the Crown Court erred in law (a) by not considering self-defence or (b) by dismissing the appeal; and (3) whether the approach adopted in the Crown Court constituted or involved a misdirection of law as to character.

The appeal was dismissed.

The Court was persuaded that it was open to the Crown Court to find that PC Millett was acting in the execution of his duty. The Crown Court was the tribunal of fact. They heard and saw the witnesses and were best placed to assess the contextual evidence of the surrounding circumstances, the proximity of members of the public to the scene and the atmosphere at the time. [37] In a borderline case, an appellate tribunal should be cautious before concluding that the findings made were not reasonably open to the tribunal of fact. The Court was not prepared to draw that conclusion here. The Crown Court might have decided the issue the other way, but that does not mean their decision was wrong; the findings made were a sufficient evidential basis for the conclusion that PC Millett was acting in the execution of his duty. [38]

Regarding the issue of self-defence, the judge had been fully alive to the possibility of self-defence. He did not in terms state his awareness of the proposition that the defence might need considering even if not raised by the defendant, but that does not matter. The decision of the court was that no prima facie case of self-defence was raised. The Crown Court therefore considered the issue of self-defence and did not fail to do so. [42] Nothing material turns on any distinction between whether a prima facie case was raised, and whether the defence succeeded. The issue was considered. In the High Court’s view, the Crown Court was right to reject self-defence on the facts. [43]

The third question was whether the approach of the Crown Court constituted or involved a misdirection of law as to character. The Crown Court clearly rejected the appellant’s submission below that he was entitled to a fully-fledged two limbed good character direction. It was right to reject that submission. The appellant was not a man of absolute good character. Nor was the court made aware of the full picture concerning the appellant’s previous convictions. The “mainly drugs related” very old convictions could have included, for example, offences of theft to fund a drug habit. [51] There was no misdirection in relation to the appellant’s character. [52]

Frederick Wilmot-Smith, author of Equal Justice: Fair Legal Systems in an Unfair World, charts the recent developments in digitising the civil courts, and the spread of technological advances throughout our entire court system. He examines the potential risks digitisation poses to the delivery of justice, and contrasts these developments with the ways in which online retailers such as eBay or Airbnb adjudicate on disputes between customers and suppliers. He also relates his own experience of using the new digital courts processes in a money claim.