Digest
Case-law Digest
COMPANY LAW
(1) Cosmetic Warriors Ltd (2) Lush Cosmetics Ltd v (1) Gerrie (2) Hawksley [2015] EWHC 3718 (Ch)
The trial judge held, that there was no absolute prohibition on considering extrinsic material for the purpose of interpreting the articles of association of a company; however, that admissible background was, for the purposes of construction, limited to what any reader of the articles would reasonably be supposed to know. In contrast, it was held that implication of a term based on extrinsic evidence of which only a limited number of people would have known was impermissible.
Comment: The Supreme Court’s judgments in Arnold v Britton and others [2015] UKSC 36 and Marks and Spencer plc v BNP Paribas Securities Services Trust Company (Jersey) Ltd and another [2015] UKSC 72, which are causing a re-evaluation of established principles on the construction of contracts and implied terms. In addition and in particular, advisers should refer to Lord Hoffmann’s opinion in Attorney General of Belize (2) ECOM Ltd (3) Belize Telecommunications Ltd v (1) Belize Telecom Ltd (2) Innovative Communication Company LLC [2009] UKPC 10. Cosmetic Warriors Ltd is noteworthy because it is one of the first cases about articles of association after these important decisions.
Eclairs Group Ltd v JKX Oil & Gas plc; Glengary Overseas Ltd v JKX Oil & Gas plc [2015] UKSC 71
The court held unanimously that the proper purpose rule (now found in Companies Act 2006 s171) applied to the exercise of a power given to the directors under the articles. The purpose of the rule was to enforce the proper conduct of directors, and it was also fundamental in ensuring the constitutional distinction between the board of directors and the shareholders.
Comment: The judgment is noteworthy because of the discussion it contains about the operation of the rule. The traditional view is that where a power is exercised for more than one purpose, it will be invalidated if the substantial purpose is improper.
Lords Sumption and Hodge preferred a new approach whereby an exercise of a power would be invalidated if the impermissible purpose was causative. The majority held, however, that it was not appropriate to develop company law in this way, without having heard argument.
CRIME
Quayum v Director of Public Prosecutions [2015] EWHC 1660 (Admin)
Having been convicted, in his absence, of using a motor car without a valid policy of insurance, the defendant appealed to the Crown Court against conviction. In advance of the appeal hearing, evidence was served on the prosecution which indicated that the defendant was covered by the insurance policy as he was not using his vehicle for a business purpose. The prosecution declined to concede the appeal, and at the hearing the appeal was allowed after a submission of no case to answer at the close of the prosecution case. An application was made for a defendant’s costs order from central funds, and later an application was made for costs against the Crown Prosecution Service. The Crown Court declined to make the latter order.
The Queen’s Bench Division held that as the court process had concluded when the application for a wasted costs order was made, the court was prevented from hearing the application.
EMPLOYMENT
Inex Home Improvements Ltd v (1) Hodgkins and 10 others (2) Bradley (3) Floyd (4) Midland Decorators Ltd [2016] IRLR 13
The question of who belongs to ‘an organised grouping of employees’ for the purpose of the service provision change rules in the Transfer of Undertakings (Protection of Employment) (TUPE) Regulations 2006 SI No 246 was answered by taking a purposive approach in Inex Home Improvements Ltd (para 3). The claimants worked under a subcontract to perform building works. Work was released by Thomas Vale in tranches, and the claimants were laid off in keeping with provisions in their contracts. This was expected to be temporary, since further work would be available shortly, but in fact that work was given to a different subcontractor. The employees concerned brought a claim under TUPE.
The Employment Appeal Tribunal decided that the employees formed ‘an organised grouping’ capable of being transferred via a service provision change, even though they were no longer working: ‘Something more than a temporary lay-o ff caused by a temporary absence of work is required to dissolve the organised grouping’ (para 70).
Nursing & Midwifery Council and another v Harrold [2016] IRLR 30
A civil restraint order (CRO) may be made in relation to claims or applications in the High Court and the county court; however, does the High Court have jurisdiction to make a CRO preventing further claims being brought in the employment tribunal (ET)?
In Nursing & Midwifery Council and another, a nurse who had been dismissed and struck off brought a series of claims against the council and her former employer, mainly in the ET. All but one of her claims was dismissed. The High Court held that it had ‘inherent jurisdiction’ to make a CRO covering proceedings before the ET (para 37).
EUROPEAN LAW
Scotch Whisky Association and others v Lord Advocate; Advocate General for Scotland Case C-333 /14
The Court of Justice held that the effect of Scottish legislation to impose a minimum price per unit of alcohol would be significantly to restrict the market (in breach of EU law), but that this could be avoided by a measure designed to increase the price of alcohol instead of one imposing a minimum price per unit of alcohol.
Comment: The court’s decision does not preclude the use of taxes to limit alcohol consumption: what matters is the way in which the proposed tax is structured. Notwithstanding media reports, the court’s opinion is unlikely to deter governments from using the tax system to discourage alcohol consumption or products with a high proportion of sugar (indeed, legislation has recently been introduced in the Irish parliament (see the Public Health (Alcohol) Bill)) .
INSOLVENCY LAW
TOC Investments Corporation v Beppler & Jacobson Ltd and others [2016] EWHC 20 (Ch)
The judge held that a company was entitled to be reimbursed the amounts it had advanced for expenses incurred by liquidators under a funding agreement.
Comment: The decision is noteworthy because of the endorsement it provides for the expansive view taken by Mr Justice David Richards in Lomas and others v Burlington Loan Management Ltd and others [2015] EWHC 2270 (Ch) of what is known as the ‘principle in Ex parte James’ : while the principle may have originally been applied in narrow circumstances (money paid under mistake of law), it was no longer so confined and continued to provide a means for the court to control the conduct of its officers (including administrators, liquidators and trustees in bankruptcy) (para 174).
TAXATION
Moorthy v HM Revenue and Customs [2016] UKUT 13 (TCC)
The Upper Tribunal held that a settlement payment fell within Income Tax (Earnings and Pensions) Act 2003 s401, and was therefore taxable as employment income. Section 406 provides that payments made: in connection with the termination of employment by the death of an employee; or on account of injury to, or disability of, an employee, are not regarded as employment income. The tribunal held that ‘injury’ within this exemption did not include injury to feelings (para 63).
Comment: This is a significant decision from the Upper Tribunal, in which the Equality and Human Rights Commission lodged written submissions, providing much needed clarity on the meaning of ‘injury’ within section 406 (para 22).