Digest

Case-law Digest

COMPANY LAW

Validity of a floating charge
In the matter of Armstrong Brands Ltd (In Administration) and in the matter of the Insolvency Act 1986
[2015] EWHC 3303 (Ch)

An order was made that the appointment of administrators, as the holder of a qualifying fl oating charge, was valid. In reaching this decision, the trial judge considered the execution requirements in Companies Act (CA) 2006 s44.

Comment: The judge has provided important guidance on the operation of section 44, which states that a document is validly executed by a company if it is signed on behalf of the company by two authorised signatories (which include every director of the company and the company secretary). It did not matter if the director signatory was no longer a director when the transaction completed. Execution and delivery need not occur simultaneously.

CONTRACT

Prosecution use of information used in asylum application
R v McGeough
[2015] UKSC 62; (2015) 26 November, The Times

The Supreme Court had to consider a defendant’s appeal, which involved the admissibility of material that had been before the Swedish authorities which had considered an unsuccessful asylum application by the defendant. The eff ect of that evidence was that the defendant had become an operational member of the IRA in the mid-1970 s and had carried out an attack on a member of the Ulster Defence Regiment in 1981.

The trial judge rejected an argument that the evidence should be excluded and, having been unsuccessful in the Court of Appeal of Northern Ireland, the defendant was again unsuccessful in the Supreme Court. In ruling that the information provided in the asylum application was admissible, the Supreme Court considered analogous legislation and concluded that the absence of any specifi c provision forbidding the use of incriminating material obtained in asylum proceedings resulted in the information concerned being admissible for the purpose of the criminal proceedings.

EMPLOYMENT

Unfair dismissal and disability discrimination
Hall v Chief Constable of West Yorkshire Police
[2015] IRLR 893

A disabled finance officer, who had suff ered medical problems, including depression and heart surgery, was dismissed in her absence, during a period of disability-related sickness, for alleged gross misconduct. When her claims for unfair dismissal and disability discrimination came before an employment tribunal (ET), it concluded that she had been unfairly dismissed.

However, the ET concluded that the dismissal did not amount to an act of discrimination under Equality Act (EqA) 2010 s15. The ET stated that the disability has to be the cause of the employer’s action, not merely the background circumstance. It took the view that the motivation for the alleged unfavourable treatment was not the claimant’s disability, but the employer’s genuine, albeit wrong, belief that she was falsely claiming to be sick. It followed that, in the ET’s judgment, the unfavourable treatment was not ‘because of something arising in consequence of the disability’ (para 7.8). The claimant appealed to the Employment Appeal Tribunal (EAT).

The employer argued before the EAT that the claimant’s disability was too remote from the dismissal for there to have been discrimination, and that the employer’s genuine belief that the claimant was behaving fraudulently broke the necessary causal connection with the claimant’s disability. Rejecting these submissions, the EAT upheld the appeal. It said that the ET had made three errors. First, it appeared to consider that it was necessary for the claimant’s disability to be the cause of the allegedly discriminatory action in order for her claim to succeed. Second, the ET made a contrast between the cause of the action and a background circumstance. This left out of account a third logical possibility, which the EAT considered was present, having regard to the language of EqA s15(1). This possibility was a significant influence on the unfavourable treatment, or a cause which was not the main or the sole cause, but was nonetheless an effective cause of the unfavourable treatment. The third error in the tribunal’s approach lay in its reference to the motivation for the unfavourable treatment. It is clear from the authorities, which the EAT examined in considerable detail, that to inquire into the motivation for unfavourable treatment is to ask the wrong question.

Comment: This decision confirms that the legal test as regards causation of disability discrimination is relatively loose. The disability simply needs to be a ‘significant influence on the unfavourable treatment, or a cause which is not the main or the sole cause, but is nonetheless an effective cause of the unfavourable treatment’ for the claim to succeed (para 42).

The practical effect of this is that key areas of dispute in disability claims will usually not concern causation, but rather such issues as whether the employee is disabled; whether the employer was aware of the disability; and whether the employer can justify its treatment by showing that it was a proportionate means of achieving a legitimate aim.

TAXATION

Preferential rights and the enterprise investment scheme
Flix Innovations Ltd v HM Revenue and Customs
[2015] UKFTT 558 (TC)

A condition of enterprise investment scheme tax relief, set out in section 173(2)( aa) of the Income Tax Act 2007, is that the acquired shares must not carry ‘any present or future preferential right to a company’s assets on its winding up’ . The shares in question carried the overwhelming majority of the risk and reward in the company’s business, but also enjoyed some small, preferential rights to a return of capital on winding up. The tribunal accepted HM Revenue and Custom’s argument that the shares did not qualify for relief.

Comment: The tribunal rejected arguments put forward by the company based on the purposive and de minimis construction of the statutory provision. The case provides a good illustration of how diÿcult such arguments are likely to be where there is a comprehensive and detailed statutory framework in place. According to the tribunal, parliament would have made express provision if it had intended that small or insignificant preferential rights were to be ignored in applying section 173(2)( aa).

Payments were taxable emoluments
?(1) Murray Group Holdings Ltd (2) Murray Group Management Ltd (3) The Premier Property Group Ltd (4) GM Mining Ltd (5) RFC 2012 plc (in liquidation) (formerly the Rangers Football Club plc
[2015] CSIH 77

Cash payments were made into an employees’ remuneration trust, the trustee of which paid these amounts into a sub-trust for the benefit of the employee and his family. The trustee of the sub-trust advanced the funds on loan to the employee. The scheme was designed to avoid the payment of income tax and national insurance contributions. The Court of Session (Inner House) held that the payments were a ‘mere redirection of … emoluments or earnings’ , and as such subject to income tax (para 59).

Comment: The decision is important because of the appellate court’s reiteration of a bright-line rule, one that has sometimes been overlooked (including, the court said, in the current case before the First-tier and Upper Tribunals): if income is derived from an employee’s services qua employee, it is an emolument or earnings and is, therefore, assessable to income tax even where the employee requests or agrees that it is redirected to a third party. As the court stated, the opportunities for avoiding tax would be considerable if the law were otherwise.