Virgin Media Limited v NTL Pensions Trustees II Ltd & ors
As a part of the “Remind me about” series, Jennifer Seaman discusses the judgment regarding the Virgin Media Limited v NTL Pensions Trustees II Ltd & ors case.
The article was first posted on Paul Newman KC’s website pensionsbarrister.com.
R (Annington Property Ltd) & Ors v Secretary of State for Defence & Ors [2023] EWHC 1154 (Admin)
On 15 May 2023 Mr Justice Holgate handed down judgment in the case of R (Annington Property Ltd) & Ors v Secretary of State for Defence & Ors [2023] EWHC 1154 (Admin).
The question at stake was whether the MoD had the right to enfranchise eight homes occupied by the families of military personnel, in a test case named as one of The Lawyer’s Top 20 Cases of 2023. The Judge decided that the MoD could enfranchise all eight houses.
In 1997, the MoD entered into a £1.662 billion sale and leaseback arrangement with Annington in relation to 80% of its family accommodation for military personnel. There were then 765 sites comprising more than 55,000 residential units. At the time, the MoD was satisfied that the agreements represented value for money, but over time concern has been expressed, including by the National Audit Office and the Public Accounts Committee, about the benefits of the deal to the taxpayer.
Under the 1997 agreement, the MoD granted Annington 999-year headleases and took underleases of each site for a term of 200 years. The rent was subject to review, including by way of a “site review” for each site on a date between 2021 and 2024. The MoD could terminate its underleases of sites or parts of sites on 6 months’ notice.
By the time that the first site review approached, there were 488 underleases still covered by the arrangements, comprising about 38,000 houses and flats.
In 2019, the parties entered into an arbitration agreement to streamline the site review process and a very distinguished arbitral panel, comprising Lord Neuberger of Abbotsbury, Professor Graham Chase FRICS and Mr Martin Butterworth FRICS, issued five awards between December 2019 and July 2021, before the arbitration was settled in December 2021. The rental values for each site were determined on the basis of a hypothetical letting between a landlord and tenant. The arbitral panel decided that the rental value for some of the sites was increased because the hypothetical tenant would appreciate that it had the ability to enfranchise the properties on them.
On 16 December 2021, immediately following the settlement of the arbitration proceedings, the MoD served an enfranchisement notice in relation to a house on a site next to RAF Cranwell in Lincolnshire; this was followed in March 2022 by a further notice in relation to the next-door house. Between 8 and 13 April, the MoD served a further six notices in relation to six houses on a site in Bristol.
Annington challenged the MoD’s right to enfranchise all eight houses, both as a matter of private law in proceedings in the Chancery Division and by way of judicial review on numerous public law grounds in proceedings in the Administrative Court. The two sets of proceedings were heard together by Holgate J, sitting in both jurisdictions, across a five-day hearing in February 2023.
The six grounds of judicial review raised a large number of complex issues of law, including about the operation of the enfranchisement and business tenancies legislation and the application of that legislation to Government departments and to companies owned by them. The MoD succeeded on all grounds. The judgment contains much that will be of interest to practitioners specialising in both property and public law.
Joanne Wicks KC and Daniel Petrides acted for the Ministry of Defence together with a large team of Counsel, working together with Slaughter and May, Forsters and Gowlings WLG.
A copy of the judgment is available here.
City Gardens v Dok 82: High Court confirms that a winding up petition may be brought notwithstanding a foreign exclusive jurisdiction clause
City Gardens Limited brought a creditor’s winding up petition against Dok 82 Limited (the Company), in relation to sums that City Gardens said were due to it by the Company under a contract governed by Hong Kong law and subject to the exclusive jurisdiction of the Hong Kong court.
At first instance, the petition was dismissed. The Court determined that the exclusive jurisdiction clause meant that the winding up petition could not be pursued, as the question of whether or not City Gardens was owed the sums in question was a matter for the Hong Kong court. The Court also rejected the petition for the further reason that there was an absence of evidence as to Hong Kong law, so that the position under the contract might be different pursuant to Hong Kong law.
In a judgment handed down on 15 May 2023, the High Court allowed City Gardens’ appeal.
Of most interest is the Court’s finding that there is binding Court of Appeal authority that, where an alleged debt is based upon a contract which contains an exclusive jurisdiction clause in favour of a foreign court, the judgment as to the exercise of the winding up power remains that of the domestic court. In other words, an exclusive jurisdiction clause does not preclude a petition proceeding on the basis of a debt arising under the contract that contains the exclusive jurisdiction clause. The only question is whether the alleged debt is disputed in good faith on substantial grounds.
The Court also held that the Judge was wrong to find that the Hong Kong law clause was a reason to dismiss the petition. The Company had failed to put forward any basis on which Hong Kong law was in fact different or adduce any evidence in this regard. The burden was on the Company, which it did not discharge. In any regard, the presumption of similarity applied such that the position was presumed to be the same as under English law.
The Court then went on to consider the facts. It determined that there was no good faith dispute on substantial grounds. It therefore allowed the appeal and made an order for the winding up of the Company.
Bobby Friedman acted for the successful appellant on the appeal (different counsel being instructed at the first instance hearing).
Supreme Court Decision on Oil Spill Continuing Nuisance Appeal
On 10 May 2023, the Supreme Court handed down judgment in Jalla & Anr v Shell International Trading and Shipping Company & Anr [2023] UKSC 16, an appeal concerning the law of continuing private nuisance.
The Claimants, who live and own property by or in the hinterland of the Nigerian Atlantic shoreline, brought a claim against various entities in the Royal Dutch Shell group of companies in respect of an oil spill that occurred in the offshore Bonga oil field in late 2011 before the English High Court. The Bonga oil spill comprised approximately 40,000 – 42,500 barrels and was one of the largest offshore oil spills in Nigerian oil exploration history.
The Defendants contested the jurisdiction of the English High Court over this claim on the basis, amongst other things, that the Claimants’ claims against the English anchor defendant were time-barred.
At first instance, Stuart-Smith J (as he then was) ruled that, subject to questions of limitation, the English Court had jurisdiction to try the claims. However, he rejected the Claimants’ argument that fresh causes of action continued to accrue on the basis that the interference with their land by the ongoing presence of crude oil from the Bonga oil spill was a continuing nuisance.
The Claimants’ appeal to the Court of Appeal was dismissed by Coulson, Newey and Lewison LJJ on 27 January 2021, but permission to appeal was granted by the Supreme Court.
The issue before the Supreme Court was whether the continued presence of crude oil from the Bonga Spill could amount in law to a continuing nuisance giving rise to fresh causes of action each day, so as to defeat the Defendants’ limitation defence to their claims in nuisance.
Lord Burrows rejected the Claimants’ arguments and dismissed their appeal. He held that in general terms, a continuing nuisance requires that there be, outside the claimant’s land and usually on the defendant’s land, repeated activity by the defendant or an ongoing state of affairs for which the defendant is responsible which causes continuing undue interference with the use and enjoyment of the claimant’s land. That test was not satisfied on the facts alleged by the Claimants where the leak constituting the source of the nuisance had been turned off after c. 6 hours.
Separately, Lord Burrows also refused the Defendants permission to cross-appeal on the questions whether there could in law be a cause of action in private nuisance at all where the nuisance emanates from the sea, or where it emanates from a single one-off event such as an oil spill.
Jonathan Seitler KC and Alice Hawker acted for the Claimants/ Appellants, along with Stuart Cribb of Essex Court Chambers.
Tax Tribunal hands down important judgment concerning “home loan double trust” inheritance tax scheme
The First-tier Tax Tribunal has handed down judgment in the case of Pride v HMRC [2023] UKFTT 316 (TC). The case concerns whether or not a “home loan double trust” inheritance tax scheme designed to remove the value of real property and/or related loan notes from an individual’s estate for inheritance tax purposes achieves its intended effect. The First-tier Tax Tribunal found that on the proper construction of the applicable legislation, including section 103 of the Finance Act 1986, which deals with the treatment of certain debts and incumbrances, the scheme failed to achieve its intended effect. The case is of wide importance given the use of home loan inheritance tax schemes in relation to real property over several years up and down the country.
Jonathan Davey KC acted for the successful respondents along with Ben Elliott of Pump Court Tax Chambers.
Court of Appeal hands down important judgment in business premises renovation allowances case
The Court of Appeal has handed down judgment in the case of London Luton BPRA Property Fund LLP v HMRC [2023] EWCA Civ 362.
The case concerns the availability of business premises renovation allowances, a form of capital allowances, under the Capital Allowances Act 2001, in relation to the conversion of a property into a hotel situated near Luton airport. The case is the first occasion on which the Court of Appeal has considered the legislation in question, which applies in respect of numerous commercial property developments up and down the country.
Jonathan Davey KC acted for the successful appellants, HMRC, along with John Brinsmead-Stockham KC, Nicholas Macklam and Sam Chandler.
Recent pensions case: how much should members pay in a “shared cost” DB scheme? – Railways Pension Trustee v Atos [2022] EWHC 3236 (Ch)
Brian Green KC and Edward Sawyer of Wilberforce Chambers recently appeared in Railways Pension Trustee v Atos [2022] EWHC 3236 (Ch), acting for the successful claimant trustee, instructed by Slaughter and May.
Summary: The case is about a section of the Railways Pension Scheme, an occupational pension scheme established under a statutory instrument, providing benefits on a Defined Benefit “shared cost” basis. The judgment of the Chancellor of the High Court, Sir Julian Flaux, resolved questions about how the section’s deficit contribution rule operates. The judgment covers a number of topics of interest to pensions practitioners, including the scope of an actuarial discretion to set deficit contributions, the nature of a power to reduce future benefit accrual, the proper approach to interpretation of a statutory pension scheme, and the effect on scheme funding of a section being unsegregated as between different classes of members.
The facts: The relevant section of the scheme was described in its rules as “shared cost”, under which the normal contribution rule provided for contributions to be paid by the employer and the active members on a 60/40 basis. The deficit contribution rule provided that if a valuation revealed a shortfall and there were no agreed arrangements between the trustee and the employer to make it good, the shortfall was to be made good by increasing normal contributions “as determined by the Actuary” (up to a cap) and by reducing future service benefits as agreed between the employer and the trustee or, in default of agreement, as “the Actuary shall determine”. In addition, the section included ex-British Rail employees who enjoyed protection under a statutory instrument made upon rail privatisation, known as the “Protection Order” (incidentally, the same piece of legislation as was considered in the seminal pensions case of South West Trains v Wightman). The Protection Order included a requirement that the employer should pay contributions “sufficient to make provision” in respect of various specified rights, including accrued and accruing pension rights under the section.
The section was in substantial deficit and the number of active members had fallen to a few dozen.
The arguments: The employer argued that the deficit contributions to be “determined by the Actuary” had to be calculated on the mechanical 60/40 basis (up to the cap) and that the future service benefit reduction, as “the Actuary shall determine”, had to reduce the remaining deficit as much as mathematically possible, which would mean reducing future benefit accrual to zero. In other words, the small number of active members would have to pay increased contributions for no benefit accrual. The Chancellor observed that this would in all probability lead to the active members opting-out of active membership, meaning that there would be no actual reduction in the shortfall at all.
The trustee argued that the actuary had a discretion as to by how much to increase contributions and reduce future service benefits, to be exercised having regard to matters such as affordability and collectability of contributions. This would mean the actuary was not obliged to set contribution increases or benefit reductions in a way likely to cause members to opt-out. The trustee argued that the Protection Order required the employer to meet any remaining funding shortfall.
The Judge’s conclusions: The Chancellor accepted the trustee’s arguments, holding that the actuary had a discretion as to the level of contribution increases and benefit reductions, and that the employer was obliged to meet the balance of cost of funding the section under the Protection Order.
Points to note: Among the points of interest to pensions practitioners are the Chancellor’s analysis of the nature of an actuarial discretion to set deficit contributions or adjust future service benefits, including notably that affordability to employees is a relevant consideration. The Chancellor said the same conclusion applied to the trustee’s fiduciary powers in respect of contribution increases and benefit reductions. On the question of pension scheme interpretation, the Chancellor considered that the textual approach in Barnardo’s v Buckinghamshire should be adopted, notwithstanding that the scheme had actually been established by legislation rather than by the usual trust deed between private parties; he also considered that essentially the same approach should be applied to interpretation of the Protection Order. Thus extraneous materials such as consultation papers and the like did not assist in the task of interpretation. The Chancellor also accepted that, because the section was not segregated as between the ex-British Rail employees with protected status and the unprotected members, the funding protection arising under the Protection Order extended to all members of the section – since otherwise the funding of protected members’ benefits would be diluted by a proportion of the funding being shared with unprotected members’ benefits.
There is now a pending application by the employer to the Court of Appeal for permission to appeal (see Case Tracker for Civil Appeals).
Permission to appeal in Mitchell v Al Jaber [2023] EWHC 364 (Ch)
Clare Stanley KC, Jia Wei Lee and Lemuel Lucan-Wilson have secured permission to appeal from the decision of Mrs Justice Joanna Smith DBE in Mitchell v Al Jaber [2023] EWHC 364 (Ch).
The case raises three important issues which the Court of Appeal will have to grapple with in due course:
- Whether, as a matter of BVI law (and English law, to the extent they overlap), a director owes fiduciary duties in respect of company’s assets post-liquidation, and if so, what the scope of these duties is;
- Whether there is a material distinction in English law between “substitutive” and “reparative” orders for equitable compensation, and if there is, how that distinction affects the approach taken to assessing awards of compensation;
- When, and in what circumstances, an unpaid vendor’s lien is excluded.
The first two issues in particular present foundational questions about the nature of equitable duties which have troubled judges and academic lawyers for many decades. This appeal presents yet further opportunity for the Court of Appeal to provide guidance and clarity in a challenging but essential area of law.
Brian Green KC and Anna Littler successful in Bermuda Court of Appeal in decision on breadth of standard form consent powers of fiduciary protectors of trusts
Judgment has just been handed down in the Court of Appeal in Bermuda (Clarke P, Kay JA, Gloster JA) in the X Trusts in which the Court reached a unanimous decision following full argument that the role of a fiduciary protector having a power of consent in relation to the exercise of trustee powers is “narrow” rather than “wide”.
This highly anticipated judgment has decisively clarified a question which has come to the fore in courts in recent years: is a fiduciary protector’s role as regards the provision of consent to a proposed exercise of a trustee power (a) to satisfy itself as to whether the trustee’s proposed exercise of the power vested in the trustee is a proper one (the “narrow role”), or (b) to decide of its own separate and independent fiduciary discretion whether the trustee’s otherwise entirely proper proposed exercise of its power may proceed (the “wide role”).
Giving the leading judgment in the Court of Appeal, Gloster JA considered three recent decisions of different courts in which the question had arisen: (1) PTNZ – a decision by Master Shuman in 2020 in which it was decided on the basis of little argument that a protector had a wide role in the nature of a joint power with the trustee; (2) the 2021 X Trusts decision at first instance in which Kawaley AJ in the Bermuda Supreme Court following full argument decided that a protector had the narrow role; and (3) a decision of the Royal Court of Jersey – Re Piedmont – given shortly after the decision in X Trusts at first instance, and again on the basis of little argument, in which Sir Michael Birt decided that the protector had the wide role.
In a wide-ranging 80 page judgment surveying the detailed arguments which had been advanced, Gloster JA held that PTNZ and Piedmont had been wrongly decided, and that a provision for protector consent to the exercise of a trustee power in its standard conventionally encountered form (i.e. without further wording conferring a wider duplicative role) was to be interpreted as providing for protector sign-off that the power is being properly exercised by the fiduciary in whom it is vested (i.e., the trustee, not the protector). Clarke P gave a short incisive judgment to the same effect.
Brian Green KC and Anna Littler acted for the successful respondent to the appeal, instructed by Macfarlanes and Cox Hallett Wilkinson (Bermuda).
Jonathan Seitler KC and Alice Hawker appear in Supreme Court case Jalla v Shell
The Supreme Court case of Jalla and another v Shell International Trading and Shipping Company and another commences today, concerning one of the largest oil spills in Nigerian oil exploration history in 2011 and the issue of ‘continuing nuisance’.
The Appellants allege that oil from the spill has devastated their shoreline and continues to cause serious damage to their land and water supplies. Because the claims against the Shell entities were commenced outside the limitation period for claims in nuisance, the claim would be barred unless it involved a ‘continuing nuisance’.
The case featured in The Lawyer’s ‘In Court this Week’ feature; read the full article here.
Jonathan Seitler KC, Alice Hawker and Stuart Cribb (Essex Court) act for the Appellants, instructed by Rosenblatt.