Commonhold – Hang on a Moment

I haven’t posted anything for some time, because I retired in January and haven’t been keeping up with recent legal developments as I hoe my cabbages and mow the lawn. However, something caught my eye last week that I really want to say something about, especially as it covers an area of law that I dealt with extensively when I was in practice. This is the Law Commission report on Commonhold, published on 21st July 2020. There is a link to the full report here. They also published reports on Leasehold Enfranchisement and on Leasehold Home Management which I may cover in the future.

Virtually all flats in England and Wales are held as long leaseholds. They may then be sublet as Assured Shorthold Tenancies, (which can also be granted out of a freehold by say dividing a house up into flats) but we are looking at the basic form of ownership here. As long ago as 2002 the concept of Commonhold was created by the Commonhold and Leasehold Reform Act 2002 but the idea was stillborn as there have apparently only been 20 developments created as commonhold in the 18 years since then. The Law Commission is looking at the matter again to see if they can get it off the ground this time.

The idea itself is fairly straightforward. A leasehold has a freeholder (the landlord) who owns the development and a tenant or number of tenants who have time-limited leases of the various units making it up – for instance the flats in a residential block of flats. This gives rise to friction because the leases will eventually run out (although normally after 99+ years), there is rent to pay, and the landlord generally manages the block and deals with the repairs etc, but at the cost of the tenants. Many foreign jurisdictions have forms of co-ownership which do away with the landlord, and the Law Commission was looking at how to set this up here. Commonhold was their first idea, and this is a second attempt at basically the same solution.

The Proposals

I am not going to go through these in detail, but the Commission provides various summaries as well as the full report on the link above, and the matter will no doubt be covered by other experts before long. My comments are broader and more practical ones.

The general idea of commonhold is that the residents own a freehold of their flats, which runs on permanently, with no rent to pay. The common parts of the buiding are owned by a commonhold association, to which the freeholders appoint directors, and they are responsible for managing the block. The residents have obligations similar to those under a lease (maintain their flats, pay for the cost of common maintenance, not disturb the neighbours etc), but with the commonhold association rather than a landlord. These are set out in a commonhold agreement. The directors can either manage the block themselves or appoint agents to do so, presumably subject to their overall control.

The report does not decide whether commonhold should be compulsory for new flats, or an alternative to leasehold. However, there are firm proposals to limit future ground rents to zero, and simplifying and cheapening the process for buying the freehold, or taking over management from the landlords. The Commission says that the final decision on which path to take is a political one which must be left to the Government. But you can see which way they want things to go.

Comments

I hope that this has been thought through, because it is an extremely complicated subject, and the Commission are proposing a radical change to a system of leasing which has run, with various amendments, since medieval times and before. Every so often there have been tweaks to correct perceived difficulties, and, once the courts have determined what the new law means, everybody knows where they are and they system runs on in its new way. Starting from scratch, which is broadly what is being proposed, is a bold step. There are any number of considerations which need to be addressed. And remember, when this was first introduced in 2002 it met a resounding raspberry from the construction and legal communities and has been virtually ignored ever since.

A few potential difficulties come to mind:

  • Who sets up the commonhold association, and drafts the commonhold agreements to start with? Presumably the developer, who then will have no further involvment in the scheme. They are unlikely to have a lot of interest in what is produced, so there are likely to be standard prescribed forms to follow. These may not suit all cases, so individual drafting will be needed for this. There is a lot of scope for difficulties here.
  • Developers will get no further income from the block once sold off – no rent or fees. So the prices of the original flats are likely to be higher to compensate. Or the development will be less attractive to the developers.
  • If there is the option of commonhold or leasehold – and there certainly be for a time, while existing leases run through, even if new leases are prohibited – how will mortgage providers behave? Will they be prepared to lend on an entirely new and untried form of land tenure?
  • Most of the disputes between flat-owners and their landlords relate to maintenance and service charges – does the work need to be done, is this a reasonable price, what do we do if some of the residents don’t pay up? These problems will still be here, only it will be with the commonhold association rather than the landlord. It isn’t a magic bullet to end all argument.
  • Who will actually run the commonhold associations? The proposal seems to be that the directors are elected by the freeholders, and presumably re-elected (or removed) from time to time. Now for a little block of 4 flats this shouldn’t be an issue. But if you are in a block with 100 flats the job could be pretty onorous, and more so if a serious issue arises, such as a major refurbishment, or repairs following say a fire. Will a director be able to manage things better than a professional freeholder, who does at least have a direct financial interest in keeping the block in good condition?
  • And how will they deal with disputes between residents? Most of the freeholders will probably pay little interest in the elections and those appointed will be the pushiest, and those with the time to spare. Or with friends in the building and maintenance trades. Is this really going to be progress? And remember that many residents will be sub-tenants and have no vote in appointing the directors at all.

I am sure that you can think of many more potential problems. Unfortunately I have no real confidence that the Government, indeed any Government, will pay sufficient attention to the details when the scheme is set up, or when problems come to light, to provide a proper solution. We are talking about peoples’ homes, and their largest-ever purchases and assets, so it is of the utmost importance to get things right.

The report is just out so the commentators are only just starting to comment. The best I have seen so far is the blogger Alrich but I am sure there will be more. But as well as the theory you need to look at the practical issues. If you don’t then unexpected things happen – see the difficulties in paying for maintenance on housing developments that lead to the Estate rentcharge problem that I dealt with in my last peice, many months ago.

Estate Rentcharges – what do you mean?

Last year all the interest was on Leasehold Houses. Developers were selling new houses as 999 year leaseholds rather than freeholds in the normal way. This meant that the buyer would pay a lump sum, or ‘premium’ as if they were buying a freehold, but also pay a small ground rent to the freeholder (initially the developer) for the duration of the lease, and a service charge to cover the cost of the provision of services, such as maintaining the roads and cutting the grass on the estate.

Leasehold Houses

Most buyers thought nothing of it. They had been tenants of flats for years and this is the way that all flats operate, so why would this be a problem? And besides, it would be explained to them that the service charge would only operate until the local council adopted the roads and the verges, and they could always buy the freehold at an indicative price of a few thousand pounds. The developers might even have gone on to explain that unless they sold the houses leasehold they wouldn’t be able to recover the service charge from all the residents, as once the first buyers sold to a new owner the new owner would not be liable to pay it because in freeholds

the burden of a positive covenant (like paying for repairing the roads) doesn’t run with the land and bind the owner for the time being,

whereas in leaseholds it does. This sounds sensible, even if the reason for it sounds rather esoteric – a Maxim of Equity that lawyers learn about in the first year of their law degree.

Now if the developers had been fair and reasonable (not their natural inclination) this wouldn’t have been a problem. And if local councils hadn’t been subject to enormous financial pressures, so they didn’t want to take over housing estates in the way that they had always done, the problems would have been reasonably short-lived. But developers worked out pretty quickly that as well as sorting out the problem of recovering the cost of maintenance they could make extra money by selling on the freeholds after they had finished the development. As the prices depended on a multiple of the ground rent the developers weren’t content with ground rents of £10 a year, but built in rapidly increasing rents, say £250, perhaps doubling every 5 or 10 years.

The new owners of the freeholds then noticed that they could make even more money by increasing the maintenance charges, getting associates to cut the grass, or manage the estate, and that they could levy charges for alterations to the properties, like changing the colour of the doors or windows, altering the kitchen, or even keeping a pet. Service charges ran to hundreds of pounds a year. And the cost of buying the freehold went through the roof – people were quoted £50,000 or more.

Clearly this couldn’t last, and the first reaction was from mortgagees, who refused to provide morgages on these properties. So nobody would buy them, and the first buyers were stuck with properties that were essentially worthless.

It was a scandal, and the government had to act. After a lot of huffing and puffing in 2017 and 2018 the Housing Secretary eventually announced on 27th June 2019 that the sale of leasehold new-built houses was to be banned, and, what is more immediate, the help-to-buy monies were not to be made available for them. There has been no legislation yet (November 2019), as far as I can see, presumably because Brexit and the General Eelction had been getting in the way, but the writing is clearly on the wall, and developers have had to think again.

Because the underlying problem hasn’t gone away. If you have a lot of estate roads, some car parking areas, grass with swings, street lighting and so forth, somebody is going to have to pay to look after it. And there will be a cost that won’t be recoverable easily from the second and subsequent owners of the freehold houses.

Estate Rentcharges

So they went back to their lawyers, who dug out an old device, beloved of the Victorians – rentcharges.

These used to be pretty common. Most Victorian houses in Manchester and the North-West were originally sold this way. The original developers would pay a sum cash-down of a bit less than the market value and would then pay a small annual sum for ever – a perpetual rentcharge. This way the landowner would get both a price for the land and a continuing income, as if he had rented it. The payment was secured in much the same way as rent would be – if payment wasn’t made then the land could be repossessed. In Victorian times this was not a real issue, as all the houses would actually be occupied by tenants anyway, so the payments were made by the landlords, who weren’t too worried if payments were occasionally missed and somebody lost their home from time to time.

Times have changed, and they are all owner-occupiers now. Rentcharges were felt to be out of date, as well as giving rise to the sorts of problems set out below, and so the Rentcharges Act 1977 prohibited the creation of most new ones, allowed existing rentcharges to be redeemed (usually for 16 times the annual payment, which was generally less than £12.50 a year), and brought all such rentcharges to an end after 60 years, ie in 2037.

However, some rentcharges survived. The sort that we are interested in is the estate rentcharge. This is defined in s2(4) and s2(5) of the Act:

(4) For the purposes of this section “estate rentcharge” means (subject to subsection (5) below) a rentcharge created for the purpose—

(a) of making covenants to be performed by the owner of the land affected by the rentcharge enforceable by the rent owner against the owner for the time being of the land; or

(b) of meeting, or contributing towards, the cost of the performance by the rent owner of covenants for the provision of services, the carrying out of maintenance or repairs, the effecting of insurance or the making of any payment by him for the benefit of the land affected by the rentcharge or for the benefit of that and other land.

(5) A rentcharge of more than a nominal amount shall not be treated as an estate rentcharge for the purposes of this section unless it represents a payment for the performance by the rent owner of any such covenant as is mentioned in subsection (4)(b) above which is reasonable in relation to that covenant.

Unpicking this for a bit, it means that you can have

  • a nominal payment, which allows the charge-owner to enforce positive covenants against the land-owner; or
  • a payment for the cost of providing services, maintenance etc for the benefit of the land or of the land and other land.

In other words, you can use an estate rentcharge to recover the cost of maintaining private roads, common areas for carparking, cutting the grass and repairing the swings – just what the developers needed. As good as a lease, in many ways. So what has gone wrong?

The Problems with Estate Rentcharges

Well, like a lot of things, if you don’t change and adapt with the times, install the upgrades, and fix things that go wrong you end up with a Victorian quill when what you need is a modern laptop.

Rentcharges had been ignored by everybody for so long that they just hadn’t been updated in the way that leasehold law had. If you have a long lease then before your landlord can bring it to an end because of failure to pay service charges they have to:

  • serve a formal demand, complete with prescribed information;
  • get approval for the charge claimed from the First Tier Tribunal or the County Court;
  • serve a notice under s146 Law of Property Act and allow you time to pay;
  • bring possession proceedings in the County Court which can allow relief if you pay up, sometimes even after you have been evicted.

All these safeguards have been brought in during the 20th and 21st century, as the balance of power between landlords and tenants has changed. But nothing much has happened with the enforcement of rentcharges. This is set out in s121 Law of Property Act 1925. You can read the section via the link but the relevant parts are:

(3) If at any time the annual sum or any part thereof is unpaid for forty days next after the time appointed for any payment in respect thereof, then, although no legal demand has been made for payment thereof, the person entitled to receive the annual sum may enter into possession of and hold the land charged or any part thereof, and take the income thereof, until … the annual sum and all arrears thereof due at the time of his entry, or afterwards becoming due during his continuance in possession, and all costs and expenses occasioned by nonpayment of the annual sum, are fully paid; ….

(4)In the like case the person entitled to the annual sum, whether taking possession or not, may also by deed demise the land charged, or any part thereof, to a trustee for a term of years, … on trust, … to raise and pay the annual sum and all arrears thereof due or to become due, and all costs and expenses occasioned …

….

(5) This section applies only if and as far as a contrary intention is not expressed in the instrument under which the annual sum arises, and has effect subject to the terms of that instrument and to the provisions therein contained.

…..

This is draconian. It allows the owner of the rentcharge to:

  • take possession or
  • grant a lease

of the land if any payment or part, is 40 days in arrears, whether demanded or not.

Furthermore, following the case of Roberts v Lawton [2016] UKUT 395 any lease that is granted can be registered against the title in priority to the landowner’s and will continue even after all arrears and costs (which can be as high as the rentcharge owner likes) have been paid in full. The only way the landowner can get their land back is if they can pay whatever the owner of the rentcharge asks for a surrender of the lease.

In that case, the arrears were between £6 and £15. The rentcharge owner had made no demand and refused to prove that they owned the rentcharge without payment of a £60 administration fee. They granted 99 year leases of the land to their directors, as trustees, and sought to register them at HM Land Registry. This was held to be valid and enforcable.

There are stories of all sorts of charges being made, from grossly excessive maintenance expenses to escalating payments growing at more than RPI. As bad as, indeed worse than, leasehold houses. Especially after the CA held in Smith v Canwell [2012] EWCA Civ 237 that the court has a very limited role under s2(5) of the Rentcharges Act 1977 in assessing the reasonableness of any charges raised.

Not only does this cause considerable heartache to the homeowners, but it is of course wholly unacceptable to mortgagees in the modern context. Any property with a rentcharge is virtually unsaleable, unless the holder agrees to exclude these remedies from the rentcharge, and rely on a simple money claim  to recover what ought to be small sums of money, or at the least give the mortgagees say 2 months’ notice of intention to enforce.

But until the community woke up to the danger (and there are numerous articles on many solicitors’ websites) they became very popular. HM Land Registry figures, (quoted by the Conveyancing Association) show that 178,769 rentcharges have been registered since 2015, and 29,968 have been registered in 2019 so far, with no doubt more in the pipeline. This weekend there were reports on the BBC Website of house sales falling through once a rentcharge was discovered by the buyer’s mortgagees, and a piece on Money Box on Radio 4 on 23.11.19.

The Solution?

Well, you could introduce the safeguards found in leases to rentcharges, or go back to leases but with more restrictions. Or even resurrect commonholds, which were introduced by the Commonhold and Leasehold Reform Act 2002 but have been almost entirely ignored by the legal and business community ever since.

Some developers use restrictions on freehold titles, meaning that properties cannot be sold without the new purchaser entering into a direct covenant with the management company to pay for the cost of maintenance etc. This can work but needs rigorous administration by all the conveyancers involves, because one break in the chain releases all the future owners from the liability.

Another posibility is to rely on the doctrine in Halsall v Brizell [1957] Ch 169 that in order to take the benefit of a covenant you have to bear the burden. This has been qualified in Rhone v Stephens [1994] UKHL 3 to emphasise that you have to have a choice in the matter. In Halsall you could decide not to make use of the right of way and so not have to contribute towards its repair. In Rhone the owner of a roof couldn’t decide not to make use of the right of support to the building partly below his house, so was not liable. And it can give rise to a lot of argument about how much of the estate you have to use before you are liable, especially if one house has,  say, its own parking and so doen’t need to use the car-park.

Councils could be given more money and given obligations to take over the common parts of developments. This would reduce the problem but not really solve it. And if developers make money on selling off the rights they might not be prepared to co-operate and offer up the land, or keep a small portion of a site unfinished so as to avoid a compulsory purchase trigger. It will need careful legisltion if it is to be effective.

Or a decisive government could take the bull by the horns and abolish the doctrine that the burden of positive covenants don’t run with the land. But this is perhaps asking a bit much.

One way or another however a solution needs to be found.

Just a Bit of Free Advice

Quite a long time ago (when I was really Coventry Man) I wrote a piece Mind What You Say on the dangers of solicitors giving free advice. It was based on the case of Padden v Bevan Ashford, and involved advice being given to a wife in relation to the giving of a charge over the matrimonial home to secure her husband’s liabilities. The advice took 15 minute or so, it was basically correct (“don’t sign it”) and there was no charge made, but the solicitors were still liable, or at any rate potentially liable as this was an appeal before the final trial of the action.

In that case the Court of Appeal made clear that if a solicitor (or other professional) accepts instructions to do something then they have to do it properly, and the fact that there is no fee does not remove their liability if they get things wrong.

The point that I made was that it is vital for the solicitor to keep a good note of the advice given, in case a disgruntled client comes back complaining up to 6 years later, and you need to be able to prove what happened perhaps 8 years later, when the solicitor has seen hundreds of other clients and can’t remember this one.

Well, there has been another case of this sort  – Jenkins v JCP Solicitors Ltd, and a useful note on it from the procedural giant Gordon Exall – so I am coming back to the subject.

The brief relevant facts (and there are lots of issues, such as suing the wrong entity that I won’t deal with here) are that Mr J, The Chairman and a major shareholder of Swansea City AFC, went to JCP for initial, free, advice on his divorce in April 2011. He was told that because of his level of indebtedness he was unlikely to achieve a clean break settlement, and he should delay matters. Subsequently Swansea City achieved promotion to the Premier League, the value of their shares soared, and in 2016 his wife petitioned for divorce and achieved a settlement of £2.25m. He  claimed that if he had been advised to start divorce proceedings in 2011 he could have avoided this result, and the solicitors should have realised that his financial position was likely to improve and advised accordingly.

Again, this is a preliminary decision on an application to strike the claim out, so all is still to play for. However from what I can see in the report it was not even argued that the solicitors were not liable because the work was free. So they have at the very least been involved in hundreds of hours of non-chargable work in preparing their defence, even if it succeeds in the end. And (if J had not mistakenly sued the new JCP Ltd instead of the JCP LLP that gave the advice) they would have had to fight (in 2019/20) on the basis of the attendance note, such as it was, of a free interview given in 2011.

The advice to take away with this is clear:

  • all advice had to be professional. It can be short, and preliminary, but this has to be made clear at the time, and the client advised to come back for more detailed advice before initial comments are relied upon;
  • take a good note (preferably typed and copied to the client) of any advice given, and keep it in your filing system so that it can be found 6 years later if necesary, after the solicitor involved has left;
  • this is especially important if the client indicates that they aren’t going to take your advice;
  • try not to give off-the-cuff advice, especially out of the office. If you do, follow it up with an email or short letter summarising what you said and emphasising its initial nature;
  • be especially careful on the telephone;
  • and in articles on the internet (this is journalism, not advice – see the box opposite);

Some people won’t advise informally at all. This is however difficult in practice, and most lawyers are prepared to have an initial chat with potential clients for 10-15 minutes. But it is vital not to give hard advice when you don’t know many of the details, and often better to insist on a formal meeting, or at least an exchange of emails, for anything that is important, or likely to become so.

Doctors are famous for trying to avoid advising on ailments at parties, with good reason. Lawyers need to take care too. Clients often don’t appreciate how complicated some questions are, and how qualified any advice has to be, and don’t really listen if you tell them of the limitations of what you can say. So if you are telling them something that matters, you need to do it properly, and preferably for a fee. At the very least, this will make it clear to both of you that you are putting your name on the line, as well as helping pay the rent..

What Do You Mean?

Quite a long time ago now I wrote a piece on the importance of lawyers, and other professionals, using intelligable language when communicating with their clients, and indeed lay people in general. My piece was called We’re all Really Interpreters and I was reminded of it by a radio discussion by Michael Rosen in the Word of Mouth series, which was on Radio 4 on 22.1.19 and will be available on their Sounds app for the next year or so.

He was talking to the family barrister Lucy Reed who blogs as Pink Tape and to an academic, Dr Laura Wright, and they agreed that the law uses a lot of unusual language that many people find hard to understand properly. This is one of Lucy’s hobby horses, as she is a leading light in The Transparency Project, which is campaigning to make things clearer, especially in the Family Courts.

Lucy has written a piece on this subject, called, somewhat more forcefully than mine, Why Do Lawyers Talk Legalese? and there is a link to it here. She explains some of the code that might puzzle the unwary layman. It’s well worth reading, and indeed following.

But it’s also important to remember that the Law, like Medicine, or Rocket Science, is a complicated technical subject, and it is impossible to eliminate all technical language, and silly to try to do so. In order to express things with the clarity that we need, lawyers have to be able to use some technical language from time to time, or we can’t do our job properly. What is wrong, and to be avoided, is using it too often, and to the wrong people.

When you get down to it, confusing language usually indicates confused thought. If you understand something properly then you should be able to explain it, at various levels of complexity, to anybody. If you can’t then you may well not know what you are talking about. If you know what I mean.

 

Recent Developments in Housing – a Round-up

As one year turns to the next it is tempting to write a piece with some of the stories that haven’t made it into the main blog during the year, and this is one of those pieces.

Homes (Fitness for Human Habitation) Act 2018 

This would have made the main blog anyway, except it was enacted on 20th December 2018 and so was too late for the year. It is a short and comparatively simple piece of legislation which more or less does what it says on the tin.

Very briefly, it imposes an obligation on the landlord of a residential lease of less than 7 yearsof a dwelling in England that the dwelling is fit for human habitation when the lease is granted, and will remain fit for human habitation throughout the length of the lease. It works alongside the obligations in s11 Landlord & Tenant Act 1985 which require landlords of short residential leases:

(a) to keep in repair the structure and exterior of the dwelling-house (including drains, gutters and external pipes),

(b) to keep in repair and proper working order the installations in the dwelling-house for the supply of water, gas and electricity and for sanitation (including basins, sinks, baths and sanitary conveniences, but not other fixtures, fittings and appliances for making use of the supply of water, gas or electricity), and

(c) to keep in repair and proper working order the installations in the dwelling-house for space heating and heating water.

The new Act expands the obligation so as to include things which are not matters of repair as such as natural lighting and internal arrangement. The factors which a court has to take into account in deciding whether the property is fit for human occupation are set out in s10:

In determining for the purposes of this Act whether a house is unfit for human habitation, regard shall be had to its condition in respect of the following matters—

repair,

stability,

freedom from damp,

internal arrangement,

natural lighting,

ventilation,

water supply,

drainage and sanitary conveniences,

facilities for preparation and cooking of food and for the disposal of waste water;

in relation to a dwelling in England, any prescribed hazard;

and the house shall be regarded as unfit for human habitation if, and only if, it is so far defective in one or more of those matters that it is not reasonably suitable for occupation in that condition.

There are the usual exceptions for unfitness caused by the tenant’s breach of obligations, or to carry out works that are prohibited by legislation (eg planning and listed-building laws) or for which he needs consent from a third party (eg a neighbour) and despite reasonable endeavours has not been able to get it.

The remedy is in the County Court, and because of s17 of the 1985 Act the court has wide powers to order specific performance as well as awarding damages.

The Act applies to all new tenancies granted on or after the commencement date – 20th March 2019, including the periodic tenancies that arise at the end of a fixed-term, and to all periodic tenancies from 20th March 2020.

This is only a short note. The Act was heavi;y supported by Giles Peaker, and there is a much more detailed note on his blog Nearly Legal.

McDonald v McDonald – application in the ECHR

I covered this case when it was in the Supreme Court here. The losing party had applied to the ECHR, arguing that there was a right to review the proportionality of any possession claim if it was based on mandatory grounds – in this case s21 Housing Act 1988.

The ECHR rejected the application as inadmissible, basically on the same grounds that the SC had used. The Convention is not directly enforceable in a dispute between two inividuals, and so a contractual or statutory claim such as this one is not subject to claims for proportionality. It would be different if a public body was involved (such as the Pinnock case). But the national courts were entitled to apply national legislation, such as s21, which drew a line between the competing rights of two individuals, and the ECHR would not interfere.

There is, as ever, a much more detailed note on Nearly Legal.

Consultation for a new Housing Court

The Government has launched a consultation on whether a new Housing Court should be formed and all submissions need to be in by 22nd January 2019 – further details here.

Superficially there would appear to be a lot to be said for a court full of specialists who could deal with possession claims in residential cases, disputes over deposits, harrassment and eviction claims, injunctions seeking access to residential properties and so on.

However, the leading suggestion is that this should be based on the First Tier Tribunal (Property Chamber), and although these tribunals have a lot of expertise big problems arise because they do not award costs in most cases, have no provision for Legal Aid, and cannot grant injunctions. This would seriously restrict the ability of many tenants to enforce their rights. Landlords generally attend the FTT with lawyers, and unless tenants can have Legal Aid, or have the possibility of No-Win No-Fee assistance from solicitors (which requires the payment of costs by the loser) then the system is going to be very unfair.

And although the FTT has some spare capacity at present, they really will not be able to cope with the current 120,000 possession cases a year, let alone other housing matters.

This clearly isn’t straightforward. There are articles pointing both ways by Nearly Legal, and by David Smith of the RLA, and a more recent one from Nearly Legal, so you need to think about it and then have your say by 22nd January 2019.

And a Happy New year to you all.

The Secret Barrister – Stories of the Law and How it’s Broken

Now I don’t usually do book reviews here. It’s not that sort of blog. But this isn’t the usual sort of book. As the title (above) says it tells you how the law is broken – not as in speeding or murder, but as in a system failing to work properly or, in some cases, at all.

Written by the well-known (and strictly anonymous) criminal barrister and blogger really  known on Twitter as @BarristerSecret (and whose blog is to be found here) it came out in March and has shot to the top places of the bestseller lists and stayed there for weeks.  And although I haven’t done any criminal law since shortly after coming to Coventry (in the days when I really was Coventry Man) I bought and read it. Many of you will have also done this, and the rest of you ought to buy and read it too, because it is important, and talks about things that matter.

He (or she) gives a view of the state of the criminal justice system in England & Wales today, as seen from the coal face. And it isn’t a pretty sight. The basic problem is gross underfunding for many years, with the result that there aren’t enough courts, or judges & staff, or people and resources in the CPS prosecution service, or the police, to provide an even half-decent system. And the payments to the independant lawyers concerned – the solicitors and barristers – are appallingly low, with the result that fewer and fewer lawyers will do the work, and those that are left don’t have the time and resources to investigate cases, or prepare for and attend the trials. And things will get worse as the cuts to the system continue to bite, and those that are left give up the struggle.

Now many of you may feel that you are just not going to come across the criminal justice system, so it really isn’t your problem. You aren’t criminals. But the book shows

  • how it is very easy to get caught up in some incident and then get picked as the perpetrator from, say, a dubious CCTV film, or by a dazed victim;
  • or to be accused of some historic abuse allegation, which the police feel they have to take all the way for political reasons;
  • and how many victims fail to get justice because an otherwise strong case against the perpetrator falls over because of administrative incompetence and overwork.

And it is, anyway, a poor society which allows those accused of crimes, and liable to long periods of imprisonment, or other penalties, to be convicted of things that they didn’t do, and against which they are unable to defend themselves.

There is lots more – and they put it far better than I ever can here.

The book is amusing, challenging, hard-hitting, perceptive, and a must for anybody interested in Britain today. Go out and get one!

Note The book The Secret Barrister – Stories of the Law and How it’s Broken – is published by Macmillan in hardback and is available via Amazon, or at the shops.

 

The Risks of Do-it-Yourself – Barton v Wright Hassall

There are a lot of Litigants in Person (people acting for themselves) about these days. With the virtual abolition of civil Legal Aid and much more rigorous selection by No Win No Fee providers, a large number of people are more or less forced to act for themselves in many circumstances when this is far from ideal.

Predictably, they tend to make something of a mess of things from time to time, usually caused by lack of the technical knowledge needed for litigation, with a sketchy knowledge for the Civil Procedure Rules that govern the process, and little experience of how courts operate, and what they need to be told and how to do it. This has lead to calls in some circles for LiPs to be excused from complying with the CPR, provided they are not so far adrift that they cause serious prejudice to their opponents, or real inconvenience to the courts. In fact some people have been saying that the CPR should be interpreted this way already. Others say that the way forward is either to simplify the CPR for everybody, or to provide a simplified system that LiPs have to follow, leaving the detailed rules to those proceeding with professional representation.

Now, those on the front line in litigation will know that a combination of these views have been applied in practice by the District Judges who have to deal with the bulk of the LiPs from day to day. If you are appearing against a LiP then you will know that there is rarely much point in taking technical points about procedure against them – short service of documents, failure to include all the correspondence, vague allegations in the Statements of Case, or in the evidence in support. Most DJs will just raise their eyebrows and extend the time or whatever, and you won’t get anywhere unless they are miles out of line. You do better to fight things on the merits, when the fact that their case has not been properly argued or supported by evidence will count against them in the end. I have written about this before, here.

Now last week the Supreme Court gave judgment on a case which some commentators said would enshrine the new flexibility for LiPs in law. Others were more sceptical. So read on.

Barton v Wright Hassall [2018] UKSC 12 was a professional negligence claim by Mr Barton against his former solicitors, a well known local firm in Leamington Spa. Mr Barton had fallen out with the solicitors acting on his divorce and engaged Wright Hassall to sue them for negligence. Then he fell out with WH and wanted to sue them as well. He either couldn’t find a third firm to help him, or possibly thought that he could do better himself – either way, he issued the claim himself and in the summer of 2013 the time came for him to serve it.

Wright Hassall had instructed solicitors to act for them – Berrymans Lace Mawer – and they confirmed that they were authorised to accept service of proceedings for their clients, so all Mr Barton had to do was to stick the papers in the post, or deliver them by hand to their offices. However Mr Barton decided that, as he had left things to the last day for service, he would serve them by email, and sent the appropriate paperwork off to BLM on 24th June 2013. His email itself was fine, and he appears to have enclosed the right documents with it. However, he had missed a vital point, and so service was held to be invalid. This is that in order to validly serve by email the recipient has to confirm that they are prepared to accept service in that way. Just giving an email address in ordinary correepondence won’t do, they have to say they will accept service by email. PD 6A to r 6 CPR is specific:

Service by fax or other electronic means

4.1  Subject to the provisions of rule 6.23(5) and (6), where a document is to be served by fax or other electronic means –

(1) the party who is to be served or the solicitor acting for that party must previously have indicated in writing to the party serving –

(a) that the party to be served or the solicitor is willing to accept service by fax or other electronic means; and

(b) the fax number, e-mail address or other electronic identification to which it must be sent; and

(2) the following are to be taken as sufficient written indications for the purposes of paragraph 4.1(1) –

(a) a fax number set out on the writing paper of the solicitor acting for the party to be served;

(b) an e-mail address set out on the writing paper of the solicitor acting for the party to be served but only where it is stated that the e-mail address may be used for service; or

(c) a fax number, e-mail address or electronic identification set out on a statement of case or a response to a claim filed with the court.

4.2  Where a party intends to serve a document by electronic means (other than by fax) that party must first ask the party who is to be served whether there are any limitations to the recipient’s agreement to accept service by such means (for example, the format in which documents are to be sent and the maximum size of attachments that may be received).

It all looks a bit dated now, although it was probably entirely relevant when it was introduced a number of years ago. BLM had given their email address, but hadn’t confirmed that they would accept formal service there, Mr Barton made no enquiries, and so he was all set up for failure. His email arrived, was acknowledged, but was not responded to until 4th July, by which time not only had the 4 months for service expires, but so had the limitation period of 6 years for his claim itself, so he couldn’t re-issue and serve properly. A lesson not to leave things so late.

The various courts all held that this was not good service. What is more, Mr Barton’s application for an order under r6.15 CPR, which allows the court to validate service in some circumstances, was refused. The rule provides:

Service of the claim form by an alternative method or at an alternative place

6.15

(1) Where it appears to the court that there is a good reason to authorise service by a method or at a place not otherwise permitted by this Part, the court may make an order permitting service by an alternative method or at an alternative place.

(2) On an application under this rule, the court may order that steps already taken to bring the claim form to the attention of the defendant by an alternative method or at an alternative place is good service….

Unfortunately for Mr Barton, the District Judge, the Circuit Judge on appeal, the Court of Appeal and the Supreme Court all refused to approve service under para 6.15(2), although the SC was split 3:2 against him. Lord Sumption, giving the majority judgment said that:

  • The fact that the email actually brought the claim to BLM’s attantion was not enough. If it was, then any form of service would suffice, which was not the case.
  • Service of proceedings is important as it is the start of the timing for a lot of what follows, and stops limitation running.
  • Service by email could be a problem in case it took place without the solicitors being aware of it – for example by arriving at an address whose holder was away. Hence there are rules which ought to be followed.
  • There is no special treatment for LiPs in obeying the CPR. “Unless the rules are particularly inaccessible or obscure, it is reasonable to expect an LiP to familiarise himslef with the rules which apply to any step which he is about to take.”
  • These rules are neither inaccessible nor obscure. They are published on the internet and referred to in the instructions sent out by the court when they issued the claim. They are clear to read and if Mr Barton had read them (which he hadn’t) he would have easily understood what they said.
  • It is incorrect to say that BLM were “playing technical claims” with Mr Barton. They had not said that they would accept service by email. They were under no duty to advise him, contrary to their own clients’ interests, that he should re-serve or re-issue before limitation expired.
  • There was no reason to rescue the claim using r6.15, which would cause Wright Hassall considerable prejudice.
  • The Human Rights argument  – that this was a breach of Mr Barton’s rights to a fair trial under Art 6 – got nowhere. Rules on service and limitation periods are widespread and fair.

He did however urge the Rules Committee to look at redrafting the relevant rules in the light of developments since they were first drafted.

Lord Briggs and Lady Hale dissented, and would have allowed the appeal and validated service, on the grounds that the steps taken were effective to bring the service to the Defendants’ attention. But they repeated that there was no special treatment for litigants in person, other than the fact that they generally broke the rules by ignorance rather than as part of the tactics of a professional litigator.

So that is that. No special rules for LiPs for now, but perhaps a little bit more flexibility (depending on who is judging your case).

And finally it is perhaps ironic that if Mr Barton had put the documents in the post on that last day they would still be in time even if the Royal Mail took a week to deliver them. Because the rules on the time for service of a claim form, contained in r7.5 CPR provide:

(1) Where the claim form is served within the jurisdiction, the claimant must complete the step required by the following table in relation to the particular method of service chosen, before 12.00 midnight on the calendar day four months after the date of issue of the claim form.

And the step for service by post (or DX) is just the posting of the document, not its delivery.

More details in the usual places –  Civil Litigation Brief gives practical advice as well.

Does Carillion Ring any Bells?

I’m not going to cover the details of this topical case, because they are fast-moving, not entirely clear yet, and covered in more detail by specialists elsewhere. What matters more is that a distressingly small proportion of comentators, let alone ordinary business-owners, know very much about what happens when a business becomes insolvent, and, more to the point, goes bust.

I am going to look at a few hard truths.

The Background

The brief outline, for the sake of people reading this piece in years to come (if any) is that Carillion was the product of a merger between a number of well-known companies in the construction and facilities-management sector – part of Tarmac Construction, Mowlem, Alfred McAlpine, and part of John Laing, plus some businesses in Canada and elsewhere. It divided its activities between facilities management (eg maintenance of prisons, and railways), large constuction projects (eg hospitals and part of HS2) and mining and mineral extraction abroad. It was the second largest construction company in the UK.

After a number of apparently good years it issued a profits warning in July 2017 recording a downturn in its construction division of some £845m. The share price crashed from 192p to 45p by the end of August, resulting in the loss of 5 directors and frantic searches for refinancing or a buyer. These were scuppered at the end of September when it was revealed that the business had lost £1.15bn in the 6 months to 30th June 2017. Two further profit warnings were issued, and eventually all the options ran out and the company was placed into compulsory liquidation on 15th January 2018. The business owed some £900m, plus a £580m deficit in its pension fund.

Somewhat controvertially the Government, who had a high proportion of Carillion’s business, continued to award it contracts throughout this period, including the amazing award of a substantial share in the HS2 scheme a few days after the first profits warning.

The Outcome

The business apparently had assets worth just £29m when it closed. These would all be charged to its bankers, and although the head office in Wolverhampton may be worth something, the claims for payment on the various construction contracts are likely to be worth very little because of the counterclaims the employers are likely to raise arising out of the additional costs caused by the failure and various “defects in construction” which will come to light over the next few days or weeks.

The facilities management in the state sector – the prisons and the schools – will continue, initially funded by payments to the liquidators to cover the cost, and no doubt in due course the staff will be taken in-house by the clients, or the contracts will be re-let to other contractors, and the staff will, to the most part, be able to follow the work. There will be very little change, although the future cost will be higher because the cause of the failure was taking on contracts at unrealistically low prices in the first place.

The construction in the state sector – building the hospitals for instance – will also continue, after a bit of a hiccup. The hospital will need to be completed and the contract will have to be awarded to another contractor. This may take a bit of time, and will cost more (obviously) but there is every chance that the staff will be taken on by the new contractor, who will suddenly need just the number of workers who are working on the project when it failed, and although there will be some shaking out, and the replacement of key managers, things will continue. And hopefully some lessons will have been learned so that next time the contractor manages to finish the project intact.

The private sector work will be more difficult. Some facilities maintenance work will be taken in-house, with or without the workers, and the construction projects will continue, but after what could be a significant pause. There are likely to be more losses of employment, as new contractors bring in their own teams.

HS2 and the A14 road improvement projects are special cases: they are joint ventures between a number of contractors and they have guaranteed to take over the projects in the event of a failure such as this. Subject to their own financial stability, the survivors are likely to take over the existing staff and continue as before.

But there will be casualties – employees not taken over, pensioners and sub-contractors

The Victims

Although there has been a lot of fuss about them in the media, the employees have various sources of compensation. If they lose their jobs they will get statutary redundancy payments from the government, plus up to 8 weeks’ wages at up to £489/wk, and holiday pay, sick pay and notice pay. It may not be everything but it will be most of it, and few employees will be owed more than a few weeks at this point. And there is a good liklihood that they will be taken on again by whoever takes over the project.

Pensioners also have some protection from the Pension Protection Fund. Those receiving pensions will continue to do so at the same rates, although the rate of increase for future years will be restricted. Those who are below the scheme’s retirement age will get 90% of the pension that they would otherwise get, and subject to a cap (of some £38,500 odd for 2017). Again future rates of increase will be restricted.

It is sub-contractors, suppliers, and their employees, who will take most of the hit. Any company in Carillion’s position will have become very slow in paying their bills and the amounts that are owed will be considerable. I have heard talk that some were operating on payment terms of 120 days, or even 6 months, and for a small business this level of exposure is likely to be fatal. Even if they are taken on by the new contractors they won’t be paid for the work that they have done up until 15th January, and few businesses can afford a hole of this magnitude in their cashflow. They are unlikely to have insurance cover, and factoring won’t save them because the factor will just deduct payments from future invoices until they have been reimbursed.

If you are say an electrical contractor, if you fail then not only do your employees lose their jobs, but your suppliers, your landlords, your contractors and even (God forbid) your lawyers and accountants will miss out. To say nothing of any guarantees put up by directors or shareholders. It will be very grim.

And finally, there are the banks. There is something in the region of £900m owed to RBS, Santander, Barclays and HSBC and a few others. They will get very little of this back, and, although they won’t get much sympathy, that is money that they can’t lend to the rest of us, that can’t be invested in the economy, and we will all suffer as a result. Plus RBS still belongs to the government, and we will lose that way as well.

What can we learn?

Any manner of things:

  • Bigger is not necessarily better.
  • There is no point in bidding for a contract that has such a slim margin that the slightest problem makes it run at a loss.
  • Big construction projects used to lose money for the government because of cost and time over-runs. That is why they were put out to tender. They can still lose money for a private contractor too.
  • It isn’t always best to take the lowest bid – will the bidder still be around when the project is completing?
  • Just because the government continues to employ a company doesn’t mean that it is financially secure – so make your own enquiries.
  • Being a sub-contractor or supplier in these circumstances is risky, and this needs to be factored into your price, or indeed your decision on whether to do the work at all.

I won’t even begin on the activities of the Carillion directors, the payment of dividends when the pension funds were in deficit, the vast salaries and bonuses, and the apparant failure to see the writing on the wall. Or indeed on the government’s involvement in things. These are matters for another day.

And I am not covering the question of whether governments ought to out-source activities in this way. Again, something for another day

It is a sad time for a lot of hard-working people. We all need to learn a few hard truths.

The UNISON Case – Biggest SC Case for Years

R v Lord Chancellor (ex p Unison) [2017] UKSC 51

This is my 100th post on this blog. I started it in June 2011 and had been intending to put up a commemorative piece, going over my favourite articles and looking forward to the future. I may still be doing this, but not now. Because the SC’s decision this morning is so significant that I have to cover it immediately

The facts of the case are simple. In 2013 the government imposed fees on applications to the Employment Tribunals, all of which had previously been free. By way of contrast the civil courts have charged fees for claims, applications and other activities for hundreds of years. But the ET fees were very high – £390 for the simplest claims, and £1,200 for the more complex ones, including Unfair Dismissal, Equal Pay and Discrimination claims. There were also fees imposed in the appeal tribunal – the EAT. These fees were generally to be paid in two stages – to issue, and to proceed to a hearing.

These fees were much higher than the fees for equivalent claims in the courts, and were in many cases to be paid by applicants who had just lost their jobs, so it is not surprising that immediately after they took effect  – on 29th July 2013 – the number of applications slumped by about 80%. It would appear that many employers took the view that instead of negotiating a settlement at an early stage they would wait until they saw if the employee paid the fee to issue and to proceed to a hearing before negotiating, as the number of settlements reported to ACAS fell as well.

Now this case wouldn’t be important if all that happened was that the fees were reduced to something a bit more reasonable. This is clearly what is going to happen in the end, even though there is no indication of this as I write. No, the interest is in the way the Supreme Court laid out the manner in which it clearly intends to behave in the future, as Brexit happens and the ECJ fades out of the picture. Because it made it abundantly clear that despite the lack of the sort of constitutional supremacy that a Supreme Court has in say the United States or Germany it is going to lay down the law in a totally fearless way and is not afraid to extract constitutional rights from the Common Law if it can’t find them in statute.

The Decision

The main speech is given by Lord Reed, with whom the other Justices in a bench of 7 agree. After setting out the facts, the statistical reports, and the history of the case, he sets out the constitutional principles  – in this context the rights to access to the courts, and that statutory rights are not to be cut down by subordinate legislation. And he then gives a lesson on the constitution in extremely simple but devastating words:

66.             The constitutional right of access to the courts is inherent in the rule of law. The importance of the rule of law is not always understood. Indications of a lack of understanding include the assumption that the administration of justice is merely a public service like any other, that courts and tribunals are providers of services to the “users” who appear before them, and that the provision of those services is of value only to the users themselves and to those who are remunerated for their participation in the proceedings. The extent to which that viewpoint has gained currency in recent times is apparent from the consultation papers and reports discussed earlier. It is epitomised in the assumption that the consumption of ET and EAT services without full cost recovery results in a loss to society, since “ET and EAT use does not lead to gains to society that exceed the sum of the gains to consumers and producers of these services”.

67.             It may be helpful to begin by explaining briefly the importance of the rule of law, and the role of access to the courts in maintaining the rule of law. It may also be helpful to explain why the idea that bringing a claim before a court or a tribunal is a purely private activity, and the related idea that such claims provide no broader social benefit, are demonstrably untenable.

68.             At the heart of the concept of the rule of law is the idea that society is governed by law. Parliament exists primarily in order to make laws for society in this country. Democratic procedures exist primarily in order to ensure that the Parliament which makes those laws includes Members of Parliament who are chosen by the people of this country and are accountable to them. Courts exist in order to ensure that the laws made by Parliament, and the common law created by the courts themselves, are applied and enforced. That role includes ensuring that the executive branch of government carries out its functions in accordance with the law. In order for the courts to perform that role, people must in principle have unimpeded access to them. Without such access, laws are liable to become a dead letter, the work done by Parliament may be rendered nugatory, and the democratic election of Members of Parliament may become a meaningless charade. That is why the courts do not merely provide a public service like any other.

69.             Access to the courts is not, therefore, of value only to the particular individuals involved. That is most obviously true of cases which establish principles of general importance. When, for example, Mrs Donoghue won her appeal to the House of Lords (Donoghue v Stevenson [1932] AC 562), the decision established that producers of consumer goods are under a duty to take care for the health and safety of the consumers of those goods: one of the most important developments in the law of this country in the 20th century. To say that it was of no value to anyone other than Mrs Donoghue and the lawyers and judges involved in the case would be absurd. The same is true of cases before ETs. For example, the case of Dumfries and Galloway Council v North [2013] UKSC 45; [2013] ICR 993, concerned with the comparability for equal pay purposes of classroom assistants and nursery nurses with male manual workers such as road workers and refuse collectors, had implications well beyond the particular claimants and the respondent local authority. The case also illustrates the fact that it is not always desirable that claims should be settled: it resolved a point of genuine uncertainty as to the interpretation of the legislation governing equal pay, which was of general importance, and on which an authoritative ruling was required.

70.             Every day in the courts and tribunals of this country, the names of people who brought cases in the past live on as shorthand for the legal rules and principles which their cases established. Their cases form the basis of the advice given to those whose cases are now before the courts, or who need to be advised as to the basis on which their claim might fairly be settled, or who need to be advised that their case is hopeless. The written case lodged on behalf of the Lord Chancellor in this appeal itself cites over 60 cases, each of which bears the name of the individual involved, and each of which is relied on as establishing a legal proposition. The Lord Chancellor’s own use of these materials refutes the idea that taxpayers derive no benefit from the cases brought by other people.

71.             But the value to society of the right of access to the courts is not confined to cases in which the courts decide questions of general importance. People and businesses need to know, on the one hand, that they will be able to enforce their rights if they have to do so, and, on the other hand, that if they fail to meet their obligations, there is likely to be a remedy against them. It is that knowledge which underpins everyday economic and social relations. That is so, notwithstanding that judicial enforcement of the law is not usually necessary, and notwithstanding that the resolution of disputes by other methods is often desirable.

72.             When Parliament passes laws creating employment rights, for example, it does so not merely in order to confer benefits on individual employees, but because it has decided that it is in the public interest that those rights should be given effect. It does not envisage that every case of a breach of those rights will result in a claim before an ET. But the possibility of claims being brought by employees whose rights are infringed must exist, if employment relationships are to be based on respect for those rights. Equally, although it is often desirable that claims arising out of alleged breaches of employment rights should be resolved by negotiation or mediation, those procedures can only work fairly and properly if they are backed up by the knowledge on both sides that a fair and just system of adjudication will be available if they fail. Otherwise, the party in the stronger bargaining position will always prevail. It is thus the claims which are brought before an ET which enable legislation to have the deterrent and other effects which Parliament intended, provide authoritative guidance as to its meaning and application, and underpin alternative methods of dispute resolution.

He then sets out the principle as found in all the standard constitutional documents, which some of us will remember from the beginning of a law degree – Coke’s Institutes, Blackstone’s Commentaries, and of course Magna Carta:

  1. In English law, the right of access to the courts has long been recognised. The central idea is expressed in chapter 40 of the Magna Carta of 1215 (“Nulli vendemus, nulli negabimus aut differemus rectum aut justiciam”), which remains on the statute book in the closing words of chapter 29 of the version issued by Edward I in 1297:

“We will sell to no man, we will not deny or defer to any man either Justice or Right.”

Those words are not a prohibition on the charging of court fees, but they are a guarantee of access to courts which administer justice promptly and fairly.

For myself I prefer the traditional translation of the passage:

To no man will we sell, to no man will we deny or delay Justice and Right

He then quotes the  cases leading up to the present day. You can see them yourselves from the link at the top of this piece.

The Conclusion

Having looked at the principle he then applies it to the case. For court fees to be lawful they have to be set at a level that everybody can afford, taking into account any remission available. This is not being achieved. For a number of reasons:

  • The sharp and substantial and sustained fall in the volume of cases … as a result of the introduction of fees.
  • People are often obliged to resort to the ET jurisdiction involuntarily and unexpetedly.
  • The Review Report said 10% of claimants said they didn’t bring a claim because they couldn’t afford to do so. This means reasonably afford to do so – not by having to sacrifice “the ordinary and reasonable expenditure required to maintain …an acceptable standard of living”.
  • Hypothetical examples show that the cost to low-income families can be all their free income for up to 3 month. This is not affordable in the real world.
  • The statutory power of remission is far too restricted to change matters. It is limited to exceptional circumstances, but the problem is systemic.
  • Fees can prevent access to justice if they make it futile or irrational, such as in the case of low value claims for say unlawful deductions from wages, especially as many successful applicants recover nothing from their employers in the end.

The fees are therefore unlawful.

He scampered over the remaining points with a side-swipe at an attempted justification on economic grounds

99.             The primary aim of the Fees Order was to transfer some of the cost burden of the ET and EAT system from general taxpayers to users of the system. … Similarly, in his written case, the Lord Chancellor states that, in pursuing the aim of transferring the costs of the tribunals from taxpayers to users, “the higher the fees are, patently the more effective they are in doing so”. This idea is repeated: in recovering the cost from users, it is said, “the higher the fee, the more effective it is”.

100.         However, it is elementary economics, and plain common sense, that the revenue derived from the supply of services is not maximised by maximising the price. In order to obtain the maximum revenue, it is necessary to identify the optimal price, which depends on the price elasticity of demand. In the present case, it is clear that the fees were not set at the optimal price: the price elasticity of demand was greatly underestimated. It has not been shown that less onerous fees, or a more generous system of remission, would have been any less effective in meeting the objective of transferring the cost burden to users.

The fees are also held to be contrary to EU law as imposing limitations on the exercise of EU rights which are disproportionate, and hence contrary to Article 47 of the Charter of Fundamental Rights of the EU

Article 47 guarantees in its first paragraph that “everyone whose rights and freedoms guaranteed by the law of the Union are violated has the right to an effective remedy before a tribunal”. In terms of article 52(1):

“Any limitation on the exercise of the rights and freedoms recognised by this Charter must be provided for by law and respect the essence of those rights and freedoms. Subject to the principle of proportionality, limitations may be made only if they are necessary and genuinely meet objectives of general interest recognised by the Union or the need to protect the rights and freedoms of others.”

As a result, and despite the Lord Chancellor arguing that the SC should only make a declaration that the current levels of the fees were too high the court disagreed in strong terms:

119.         That argument mistakes the nature of the illegality with which we are concerned. This is not a case in which an administrative decision is being challenged on the basis that relevant considerations were not taken into account, or on the basis that the decision was unreasonable. The Fees Order is unlawful under both domestic and EU law because it has the effect of preventing access to justice. Since it had that effect as soon as it was made, it was therefore unlawful ab initio, and must be quashed.

Lady Hale gave a subsidiary speech explaining why the fees also amounted to unlawful discrimination on the grounds principally of discrimination against women, who made up a high proportion of the more expensive Type B claims. And the rest of the court agreed with both of them.

The Consequences

The fees are quashed. Everybody who paid them will be refunded (at a cost estimated at £32m) and until new lawful fees are fixed all ET and EAT proceedings are free. There is a lot of egg on the government’s face, mainly on Mr Grayling’s who was LC at the time they were imposed.

But more importantly the SC has shown that it will stand up for the rights implicit in the rule of law – that there must not only be laws but they must be effectively enforceble through the courts if need be. “That is why the courts do not merely provide a public service like any other.”

I have written on many occasions on the subject of the need to have an effective court system that the public can use, and if it wasn’t the middle of the night I would give you the cross references. The most prominent are Having Rights is Not Enough and Mediation – not the Complete Answer, but there are many others – it is one of my hobby-horses. I may return to this in post 101 shortly, especially after the news that the civil courts made a profit in the last year. Therefore it is really good news that the SC is doing the heavy lifting for us and won’t let a mere politician get in their way.

So that is why I feel that this is the most important SC case for years, even despite the Brexit case in January R v SoS (ex p Miller) That merely showed that the government was doing something that it could do but doing it the wrong way. This is showing that the whole basis of what they are trying to do is wrong, and that is what gives it the importance that it has.

A Tale of Sheep, Goats, Foxes and Dinosaurs

I’m writing this on 29th March 2017, and the only thing that we can be certain about for the next two years or more is that things will be uncertain. So what can you do to make the best of it, as a family, or a small business, and what can we do to help you?

Things have also changed radically in the court system. There are far fewer courts and fewer court staff, legal aid has disappeared, and procedure keeps changing. Litigants have to do a lot more work, yet the costs you can get back have been slashed. It is a new world.

And with a new landscape, like the earth after the asteroid, this is no place for dinosaurs. This piece is aimed at helping you pick the lawyers who will help you to survive. Sheep, goats and foxes survive – dinosaurs don’t – so how can you tell them apart?

The Sheep, the Goats, the Foxes and the Dinosaurs

The Sheep are big companies, the Government and its quangos, and the rich, and their lawyers. They can afford to carry on much as before and have hardly noticed a change.

The Goats are smaller businesses, landlords and tenants, and the rest of the population. They use Foxes to help them – smaller specialised lawyers and other agencies who adapt rapidly to change. They have noticed very significant increases in cost and in the time taken to deal with their legal cases. So they have to be canny and resourceful, and will be the heroes of this article.

The Dinosaurs used to be either Sheep or Goats, or their lawyers. They didn’t notice the change in the legal environment until it was too late, if at all, and so are trying to carry on as if nothing had changed, with disastrous consequences. They can’t cope with the changes and are infuriated with the way in which the Foxes run rings round them. The lawyers have gone out of business.

What to look for in a Fox

In the new world there are many new markers to help pick out those in the know:

  • They are light on their feet – ready to adapt to changes quickly. Just because they always did something one way doesn’t mean that it’s the best way now.
  • They keep up to date – there are frequent changes in the law and procedure, and in the court decisions that follow them. You have to be ahead of the crowd to win.
  • Winning matters – you want a lawyer who will win for you.
  • They keep an open mind – there are lots of different ways of doing things. If one way doesn’t work they pick another.
  • Payment by the hour is on the way out – clients much prefer fixed fees, or payment in stages, so they offer this when possible.
  • They know the shortcuts – nobody wants to go all the way to trial. They know how to get summary judgment, or get the defence struck out, or most importantly, a good offer.
  • They specialise – nobody knows everything well enough to be really good at it. And being really good matters.
  • They get it right first time – you can’t afford to do things twice.
  • They don’t carry passengers – they have a few experts plus a flexible team of contacts to call on when they need them. Why should you pay for all the extras that you don’t need?
  • They’re friendly – this is the key to being a small business. They get on well with their clients, with the courts, and with other lawyers. They don’t waste time with histrionics – they get to the point and get things done.
  • And they remember that they’re lawyers – they advise you, they do the business, but at the end of the day it’s your life, and your business, and they let you make the decisions and call the shots when it matters.

I can’t tell you everything. This is only a short article, and besides, I have a living to make, so come to me, and the Team, to learn more. But remember, this is the new reality. And if you ignore it you are likely to go the same way as the dinosaurs. Which is not a good idea, on the whole.