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On appeal from: [2017] EWCA Crim 129

R v Sally Lane and John Letts (AB and CD) (Appellants) - YouTube

This appeal considered whether the phrase in the Terrorism Act 2000, s 17(b) ‘has reasonable cause to suspect’ has the same meaning as ‘has a reasonable suspicion’.

The Supreme Court unanimously dismissed the appeal. The Court considered the principle that whenever a statutory section creates a criminal offence but does not refer to the offender’s mens rea, there is a presumption that to give effect to the will of Parliament, the court must read in words requiring mens rea. It confirmed that the presumption must give way to either the plain meaning of the words of the statute, or to other relevant pointers to meaning which clearly demonstrate what was intended. The Court cannot substitute the plain words used by Parliament for a different provision on the grounds that the court would have done so differently by providing for an element, or a greater element, of mens rea.

The Supreme Court concluded that the Prevention of Terrorism Act 1989 introduced the words “knowing or having reasonable cause to suspect” in place of the previous legislation which was worded “knowing or suspecting”. As the changes were deliberate, it must have been the Parliamentary intention to widen the scope of the offences to include those who had, objectively assessed, reasonable cause to suspect that the money might be put to terrorist use. As such, the requirement for proof of actual suspicion was removed.

For judgment, please download: [2018] UKSC 36
For Court’s Press Summary, please download: Court’s Press Summary
For a non-PDF version of the judgment, please visit: BAILII

To watch the hearing, please visit: Supreme Court Website (19 Apr 2018 morning session)

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On appeal from: [2016] CSIH 54.

Commissioners for Her Majesty's Revenue and Customs v Taylor Clark Leisure Plc (Scotland) - YouTube

This appeal considered whether certain claims for the return of overpaid VAT were to be treated as having been made by or on behalf of the ‘single taxable person’ constituted by the Taylor Clark VAT Group.

Held: it was clear from the Value Added Tax Act 1994, s 80 that HMRC’s liability for overpaid output tax is owed to the person who accounted to them for VAT. It is also clear that a claim must be made for the credit or repayment to that person before HMRC comes under any liability to credit or repay. It follows from the operation of s 43 of the Act that where the representative member has overpaid VAT, the person entitled to submit a claim during the currency of a VAT group, unless the claim has been assigned, is either the current representative member of the VAT group or a person acting as the representative member’s agent.

Claims made by Carlton were not properly regarded as claims made by Taylor Clark as representative of the VAT Group.  Carlton did not make the claims on behalf of  of the representative member. Inter alia, when Carlton made the claims, it had long ceased to be a member of the VAT group; and in each of the claims submitted Carlton was claiming repayment of sums paid from 1973, long before its incorporation in 1990, as well as in the period after 1990 when it was member of the VAT group.  Carlton did not act as the representative member’s agent. Carlton had no actual authority to send the letter on behalf of the representative member.

For judgment, please download: [2018] UKSC 35
For Court’s Press Summary, please download: Court’s Press Summary
For a non-PDF version of the judgment, please visit: BAILII

To watch the hearing, please visit: Supreme Court Website (11 Apr 2018 morning session) (11 Apr 2018 afternoon session)

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Hearings in the Supreme Court are now shown live on the Court’s website.

On Monday 9 July, the Judicial Committee of the Privy Council will hear the appeal of Harding v Attorney General of Anguilla (Anguilla). This appeal will consider whether the Appellant’s contract of engagement came to an end by the effluxion of time or whether the Appellant was dismissed from the office of Registrar of the High Court and whether the requirement that the Appellant subject herself to an interview to be reappointed as Registrar was an unlawful interference with a public office by the Government of Anguilla. It will also consider whether the Appellant has a legitimate expectation in law to a further appointment to the office of the Registrar of the High Court, whether the delay by the Court of Appeal (Anguilla Circuit) in rendering its judgment on the appeal contravened the Appellant’s constitutional right to a fair hearing, and the liability of the parties for the costs of the appeal. This will be heard in Courtroom 3.

On Tuesday 10 July, the Supreme Court will hear the appeal of Rhuppiah v Secretary of State for the Home Department. This appeal will consider the meaning of precarious in the Nationality Immigration and Asylum Act 2002, s 117B(5), the weight to be given to private life established at a time when the appellant’s immigration status was precarious when conducting the balancing exercise under art 8, and the weight to be given to financial independence and proficiency in English when conducting the balancing exercise under art 8. This will be heard in Courtroom 2.

On Wednesday 11 July, the Supreme Court will hand down the judgment in Commissioners for HMRC v Taylor Clark Leisure Plc (Scotland). The proposed panel for hand down is Lord Reed, Lord Hughes and Lord Hodge. This appeal considered whether certain claims for the return of overpaid VAT are to be treated as having been made by or on behalf of the single taxable person constituted by the Taylor Clark VAT Group, so that any repayment is due to Taylor Clark as the representative member of the single taxable person.

On Wednesday 11 July, the Supreme Court will hand down the judgment in R v Sally Lane & John Letts (AB & CD). The proposed panel for hand down is Lord Reed, Lord Hughes, and Lord Hodge. This appeal considered whether the phrase in the Terrorism Act 2000, s 17(b) ‘has reasonable cause to suspect’ has the same meaning as ‘has a reasonable suspicion’.

On Thursday 12 July, the Supreme Court will hear the appeal of OWD Ltd trading as Birmingham Cash & Carry & Anor v HMRC. This appeal will consider whether HMRC have the power to allow an alcohol wholesaler, who HMRC have identified as unfit to operate in the industry, to continue to trade lawfully on a temporary basis while the wholesaler is awaiting the outcome of their appeal against HMRC’s decision. It will also consider whether the Hugh Court is entitled to grant interim relief to enable such an alcohol wholesaler to continue to trade lawfully while they are awaiting the outcome of their appeal against HMRC’s decision. This will be heard in Courtroom 2.

On Thursday 12 July, the Judicial Committee of the Privy Council will hear the appeal (via video link) of University of Technology, Mauritius v Gopeechand (Mauritius). This appeal will consider whether the appellant, in its capacity as the respondent’s employer, is liable for the injuries sustained by the respondent while he was travelling home from work after office hours in a car provided by the appellant. This will be heard in Courtroom 2.

A full list of the cases scheduled for the Trinity term can be found here.

The following Supreme Court judgments remain outstanding:

Keefe (by his litigation friend Eyton) v Hoteles Pinero Canarias SL, heard 7 Mar 2017.

Arcadia Petroleum Ltd & Ors v Bosworth & Anor, heard 10-11 Apr 2017.

R (AR) v Chief Constable of Greater Manchester Police & Anor, heard 21 Nov 2017.

R (Stott) v Secretary of State for Justice, heard 18 Jan 2018.

Warner-Lambert Company LLC v Generics (UK) Ltd t/a Mylan & Anor, heard 12-15 Feb 2018.

Williams & Anor v London Borough of Hackney, heard 14-15 Feb 2018.

Prudential Assurance Company Ltd v Commissioners for HMRC, heard 20-21 Feb 2018.

An NHS Trust & Ors v Y (by his litigation friend, the Official Solicitor), heard 26-27 Feb 2018.

James-Bowen & Ors v Commissioner of Police for the Metropolis, heard 6-7 Mar 2018.

Commissioners for HMRC v Taylor Clark Leisure Plc (Scotland), heard 11 Apr 2018.

KO (Nigeria) v Secretary of State for the Home Department, & Or cases, heard 17-19 Apr 2018.

R v AB & CD, heard 19 Apr 2018.

Banca Nazionale del Lavoro SPA v Playboy Club London Ltd & Ors, heard 24 Apr 2018.

Totel Ltd v Commissioners for HMRC, heard 25-26 Apr 2018.

In the matter of an application by Siobhan McLaughlin for Judicial Review (NI), heard 30 Apr 2018.

Lee v Ashers Baking Company Ltd & Ors (NI), heard 1-2 May 2018.

R (Hallam) v Secretary of State for Justice; R (Nealon) v Secretary of State for Justice, heard 8-9 May 2018.

Owens v Owens, heard 17 May 2018.

Mills v Mills, heard 6 Jun 2018.

Darnley v Croydon Health Services NHS Trust, heard 7 Jun 2018.

Barnardo’s v Buckinghamshire & Ors, heard 11-12 Jun 2018.

Nottingham City Council v Parr & Anor, heard 13 Jun 2018.

In the matter of an application by Lorraine Gallagher for Judicial Review (Northern Ireland) and other cases, heard 19-21 Jun 2018.

In the matter of an application by Geraldine Finucane for Judicial Review (NI), heard 26-27 Jun 2018.

Warner v Scapa Flow Charters (Scotland), heard 28 Jun 2018.

Dooneen Ltd (t/a McGuines Associates) & Anor v Mond (Scotland), heard 3 Jul 2018.

Regency Villas Title Ltd & Ors v Diamond Resorts (Europe) Ltd & Ors, heard 4-5 Jul 2018.

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On appeal from: [2016] EWCA Civ 1092

Goldman Sachs International & N.Z. Superannuation Fund & others v Novo Banco SA - YouTube

This appeal considered whether the obligation under Directive 2001/24/EC, art 3 to apply reorganisation measures in accordance with the law of their home member state meant that the effect of a reorganisation measure taken by Banco de Portugal in August 2014 to transfer liabilities to the respondent fell to be determined by the effect in Portuguese law of a later decision in December 2014, and/or whether the December 2014 decision was itself a reorganisation measure which required recognition by the English courts.

The Supreme Court unanimously dismissed the appeal. The Court held that the purpose of art 3 of the Reorganisation Directive is to ensure that all assets and liabilities of the institution, regardless of the country in which they are situated, are dealt with in a single process in the home member state. It is not consistent with the language or the purpose of art 3 that an administrative act such as the December decision, which affects the operation of a “reorganisation measure” under the law of the home state, should have legal consequences as regards a credit institution’s debts which are recognised in the home state but not in other member states.

In addition, the Court held that because art 3  does not only give effect to “reorganisation measures” throughout the EU, but requires them to be “applied in accordance with the laws, regulations and procedures applicable in the home member state.  it cannot make sense for the courts of another member state to give effect to a “reorganisation measure” but not to other provisions of the law of the home state affecting its operation. Therefore  the effect of the August decision cannot be recognised without regard to the December decision. Therefore,  it follows from the agreed propositions of Portuguese law and from the requirements of art 3(2) of the Reorganisation Directive that an English court must treat the Oak liability as never having been transferred to Novo Banco. Novo Banco was therefore never party to the jurisdiction clause.

For judgment, please download: [2018] UKSC 34
For Court’s Press Summary, please download: Court’s Press Summary
For a non-PDF version of the judgment, please visit: BAILII

To watch the hearing, please visit: Supreme Court Website (17 Apr 2018 morning session) (17 Apr 2018 afternoon session) (18 Apr 2018 morning session) (18 Apr 2018 afternoon session)

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On appeal from: [2017] EWHC 3056 (Admin)

Belhaj and another (Appellants) v Director of Public Prosecutions and another (Respondents) - YouTube

This appeal considered whether judicial review of a decision not to prosecute is a proceeding ‘in a criminal cause or matter’ for the purposes of the Justice and Security Act 2013, s 6.

The Supreme Court allowed the appeal by a majority of three to two holding that the adoption of closed material procedure requires specific statutory authority. The Justice and Security Act 2013 gave the High Court a general statutory power, in certain circumstances, to receive “closed material” which is disclosed only to the court and to a special advocate. As explained in the 2011 Justice and Security Green Paper, the Act was a response to a growing number of civil claims for damages against which the government was unable to defend at trial except through the unacceptably damaging disclosure of secret material. Those claims instead had to be settled [6-7].

The ordinary and natural meaning of “proceedings in a criminal cause or matter” includes proceedings by way of judicial review of a decision made in a criminal cause, and nothing in the context or purpose of the legislation suggests a different meaning. In English criminal procedure many decisions made in ongoing or prospective criminal proceedings are subject to judicial review in the High Court. Judicial review therefore cannot be regarded as an inherently civil proceeding. It is an integral part of the criminal justice system [15-16]. Judicial interpretations of the phrase “criminal cause or matter” in the Judicature Acts primarily reflected the natural meaning of the words, rather than any special feature of the Acts. A “cause” is a proceeding, civil or criminal, actual or prospective, before a court. A “matter” is something wider, namely a particular legal subject-matter, although arising in a different proceeding. The appellants’ application is an attempt to require the DPP to prosecute Sir Mark Allen. That is just as much a criminal matter as the original decision not to bring a prosecution. Parliament is unlikely to have intended to distinguish between different procedures having the same criminal subject-matter and being part of the same criminal process; but the draftsman could have done so easily, for example by omitting the reference to a “matter” [17-20].

The Green Paper indicates that the distinction between criminal and civil proceedings in section 6 reflected the greater degree of control exercisable by the government in criminal cases, in which the prosecution can: (i) chose the material on which it relies, (ii) seek to limit the disclosure of unused material on the grounds of public interest immunity; and (iii) withdraw the prosecution. That rationale does not require closed material procedure to be available in an ancillary judicial review of a decision made as an integral part of the criminal justice process, when it would not be available for an actual criminal trial [22-24].

For judgment, please download: [2018] UKSC 33
For Court’s Press Summary, please download: Court’s Press Summary
For a non-PDF version of the judgment, please visit: BAILII

To watch the hearing, please visit: Supreme Court Website (22 Mar 2018 morning session) (22 Mar 2018 afternoon session)

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Hearings in the Supreme Court are now shown live on the Court’s website.

On Monday 2 until Tuesday 3 July, the Judicial Committee of the Privy Council will hear the appeal of Stubbs v The Queen (Bahamas) and other cases. This appeal will consider whether Isaacs JA, who had presided over an earlier, aborted trial, should have disqualified himself form sitting on the appeal; and whether the appellants’ convictions are rendered unsafe by (i) the admission of various pieces of hearsay evidence; (ii) dock identifications; (iii) inadequate directions in relation to identification evidence; (iv) the prosecution’s failure to call witnesses of primary fact whose evidence tended to exculpate one of the appellants; (v) the admission of expert evidence by way of a report rather than live evidence; and (vi) the trial judge’s failure adequately to sum up and differentiate the case of one of the appellants from that of his co-defendants. It will also consider whether the sentence of life imprisonment imposed on the appellants (i) were imposed on a wrong basis given that there was no evidence the appellants knew the deceased was a police officer; (ii) failed to take into account constitutional breaches in mitigation; and (iii) are unconstitutional because they are not de jure and de facto reducible. This will be heard in Courtroom 3.

On Tuesday 3 July, the Supreme Court will hear the appeal of Dooneen Ltd (t/a McGuines Associates) & Anor v Mond (Scotland). This appeal will consider the construction of the expression ‘final distribution’ in a voluntary trust deed for creditors, and whether this includes a distribution made when the creditors receive less than 100 pence in the pound and there remain (following that distribution) assets vested in the trustee, albeit the trustee is unaware of their existence. This will be heard in Courtroom 2.

On Wednesday 4 to Thursday 5 July, the Supreme Court will hear the appeal of Regency Villas Title Ltd & Ors v Diamond Resorts Ltd & Ors. This appeal will consider, in the context of easements, the correct approach to the requirement that to qualify as an easement a right must accommodate the dominant tenement in the sense that it provides ‘utility and benefit’ in the use of the dominant land. It will particularly consider the correct approach when the right is a right to recreation which is enjoyed in a self-contained way on the servient land. The correctness of the decision in Re Ellenborough Park is also in issue. This will be heard in Courtroom 2.

On Wednesday 4 July, the Supreme Court will hand down the judgment in Belhaj & Anor v Director of Public Prosecutions & Anor. The proposed panel for hand down is Lady Hale, Lord Sumption and Lord Lloyd-Jon. This appeal considered whether judicial review of a decision not to prosecute is a proceeding ‘in a criminal cause or matter’ for the purposes of the Justice and Security Act 2013, s 6.

On Wednesday 4 July, the Supreme Court will hand down the judgment in Goldman Sachs International v Novo Banco SA. The proposed panel for hand down is Lady Hale, Lord Sumption and Lord Lloyd-Jon. This appeal considered whether the obligation under Directive 2001/24/EC, art 3 to apply reorganisation measures in accordance with the law of their home member state meant that the effect of a reorganisation measure taken by Banco de Portugal in August 2014 to transfer liabilities to the respondent fell to be determined by the effect in the Portuguese law of a later decision in December 2014. It also considered whether the December 2014 decision was itself a reorganisation measure which required recognition by the English courts.

Lord Justice Kitchen and Lady Justice Arden have been promoted to the Supreme Court, with the latter being the third woman to be appointed to the Supreme Court bench. They are to go up on October 1st. Lord Justice Sales is also being promoted, to start in the Supreme Court on January 11th. This is reported in The Times Brief (paywall).

A full list of the cases scheduled for the Trinity term can be found here.

The following Supreme Court judgments remain outstanding:

Keefe (by his litigation friend Eyton) v Hoteles Pinero Canarias SL, heard 7 Mar 2017.

Arcadia Petroleum Ltd & Ors v Bosworth & Anor, heard 10-11 Apr 2017.

R (AR) v Chief Constable of Greater Manchester Police & Anor, heard 21 Nov 2017.

R (Stott) v Secretary of State for Justice, heard 18 Jan 2018.

Warner-Lambert Company LLC v Generics (UK) Ltd t/a Mylan & Anor, heard 12-15 Feb 2018.

Williams & Anor v London Borough of Hackney, heard 14-15 Feb 2018.

Prudential Assurance Company Ltd v Commissioners for HMRC, heard 20-21 Feb 2018.

An NHS Trust & Ors v Y (by his litigation friend, the Official Solicitor), heard 26-27 Feb 2018.

James-Bowen & Ors v Commissioner of Police for the Metropolis, heard 6-7 Mar 2018.

Belhaj & Anor v DPP (expedited), heard 22 Mar 2018.

Commissioners for HMRC v Taylor Clark Leisure Plc (Scotland), heard 11 Apr 2018.

KO (Nigeria) v Secretary of State for the Home Department, & Or cases, heard 17-19 Apr 2018.

Goldman Sachs International v Novo Banco S.A., heard 17-18 Apr 2018.

R v AB & CD, heard 19 Apr 2018.

Banca Nazionale del Lavoro SPA v Playboy Club London Ltd & Ors, heard 24 Apr 2018.

Totel Ltd v Commissioners for HMRC, heard 25-26 Apr 2018.

In the matter of an application by Siobhan McLaughlin for Judicial Review (NI), heard 30 Apr 2018.

Lee v Ashers Baking Company Ltd & Ors (NI), heard 1-2 May 2018.

R (Hallam) v Secretary of State for Justice; R (Nealon) v Secretary of State for Justice, heard 8-9 May 2018.

Owens v Owens, heard 17 May 2018.

Mills v Mills, heard 6 Jun 2018.

Darnley v Croydon Health Services NHS Trust, heard 7 Jun 2018.

Barnardo’s v Buckinghamshire & Ors, heard 11-12 Jun 2018.

Nottingham City Council v Parr & Anor, heard 13 Jun 2018.

In the matter of an application by Lorraine Gallagher for Judicial Review (Northern Ireland) and other cases, heard 19-21 Jun 2018.

In the matter of an application by Geraldine Finucane for Judicial Review (NI), heard 26-27 Jun 2018.

Warner v Scapa Flow Charters (Scotland), heard 28 Jun 2018.

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Steven Sieff, consultant in the tax team at CMS, comments on the decision handed down by the UK Supreme Court in the matter of Project Blue Ltd v Commissioners for Her Majesty’s Revenue and Customs [2018] UKSC 30.

On 13 June 2018, the UK Supreme Court delivered its judgment in the Project Blue SDLT case (read our preview of the decision here). The case was decided by majority decision in HMRC’s favour, overturning the previous Court of Appeal decision. It is a huge victory for HMRC in tax terms and a significant one for advisers going forward. Lord Hodge (on behalf of Lady Hale, Lord Hughes and Lord Lloyd-Jones) delivered the majority view, with only Lord Briggs dissenting.

Factual Background

The transaction at the heart of the case was the sale of the site of the former Chelsea Barracks in London by the Ministry of Defence to the sovereign wealth fund of the State of Qatar, funded in part by a Quatari bank. The total consideration actually paid was one of the issues in the case but at its highest could have been £1.25 billion, so potential SDLT of some £50 million. And that doesn’t take account of any cases which were waiting for the outcome of this one. The quantum of tax at stake and the parties concerned would probably have been enough to make this case high profile, but it also marked the first time the courts had seriously been asked to consider the potentially wide ranging SDLT anti avoidance legislation. So a keenly awaited decision.

SDLT issues

The transaction in question was structured in such a way that it appeared to string two SDLT relieving provisions together to result in no SDLT being payable. This was achieved by a sale from the Ministry of Defence (‘MOD’) to a ‘Project Blue’ company (‘PBL’) owned by State of Quatar, followed immediately by a subsale of the land to the funding bank. The funding bank leased the land back to PBL and at the same time put/call options were granted over the freehold between the bank and PBL. In theory this meant that the initial transfer to PBL was not taxed due to the rules allowing subsale relief in place at the time and that the further transfer and leaseback were also not taxed due to the exemptions in place to allow Shari’a compliant funding. The first key question was whether this scheme worked.

Following on from the question of whether the scheme worked was the question of if or how the SDLT anti-avoidance legislation would apply.

Did the scheme work or not?

The majority judgement overruled the Court of Appeal’s finding that that the scheme did NOT work. The Court of Appeal had concluded on the basis of previous SDLT case law (HMRC v DV3 RS LP [2013] EWCA Civ 907) that the effect of the subsale provisions was that no land interest moved to PBL. This in turn meant PBL had no interest to transfer on for the purposes of the Shari’a exemption and therefore the structure could not qualify for exemption. So the first technical question before the Supreme Court was whether to follow the DV3 logic on the effect of the subsale. Readers with long memories and a particularly keen interest in SDLT will perhaps recall that certain commentators (the author included) believed at the time that the reasoning behind the DV3 decision was flawed. Rather than disregarding the entire contract, a better view would have been that the legislation removes the taxing point for this contract. SDLT applies on substantial performance or completion and the wording of the subsale rules was to ignore these taxing points in relation to the original contract. That is not the same as denying the effect of the contract entirely. So this case would have been an excellent opportunity to ‘correct’ DV3. Unfortunately, although there are passages where the Lords come close to reanalysing the old subsale provisions (Lord Briggs comes closest at para 116), they never go so far as to dismiss DV3. As it turned out they didn’t need to. Despite the subsale having the technical effect of not transferring the interest to PBL for SDLT purposes, the Lords found that on an analysis of the Shari’a exemption, it was sufficient that PBL was the bank’s customer and in real terms had the right to subsell the land. So the net effect of these findings was an effective SDLT saving scheme.

Readers who have not been following Project Blue closely would be forgiven for thinking that an effective SDLT scheme is good news for the taxpayer. But in this case the opposite is true. The Court of Appeal had found that the scheme did not work, but this turned out to be good news for the taxpayer because it meant that HMRC were now out of time to go after the funding bank having been ‘relentlessly pursuing the wrong taxpayer’ (to quote counsel for the taxpayer and Lord Briggs at para 129 of the Supreme Court judgment) from close to the outset. It also meant that the anti-avoidance legislation never came into play because there had been no effective scheme. So now that the Supreme Court had reversed the position by finding that there WAS an effective scheme, this opened the gateway to the anti-avoidance legislation.

SDLT anti-avoidance legislation

This is the bit that advisers were waiting for. The first real test of HMRC’s perceived ‘nuclear’ weapon, the SDLT anti-avoidance provisions.

One of the curious things about the SDLT anti-avoidance is that there is no mention in the statute of any motive test. We know it is anti-avoidance because it says that at the heading of the provisions, but that aside there is no mention of motive or purpose. This contrasts with most anti-avoidance where the legislation makes it clear that it’s only supposed to catch you if you’re being naughty. Some observers may have been hoping that the court might take the opportunity to ‘read in’ some type of purpose test (it is anti-avoidance legislation after all) but most (including HMRC) were anticipating that in this respect the Supreme Court was likely to follow the obiter dicta comments of the Court of Appeal in finding that motive/purpose is simply not relevant when applying the provisions. And indeed, this proved largely to be the case. The question of whether this structure was put in place deliberately to avoid SDLT or whether the saving arose fortuitously is never really discussed by the Supreme Court although parts of the dissenting judgement appear to apply that the effect was achieved innocently, notwithstanding the findings of the First Tier Tribunal that PBL had NOT established that it had entered into the Shari’a compliant financing for religious reasons. Either way, motive didn’t matter and the anti-avoidance legislation still applied.

The result of this was that the Supreme Court gave us a guide as to how to apply the untested anti-avoidance. The entire judgement is of interest but the majority of the debate centred around who should be identified as the purchaser for the notional transaction that the anti-avoidance demanded and what amount of consideration was to be taxed. This still mattered a great deal as HMRC had only pursued PBL for the tax, so a finding that the bank had to be seen as the notional purchaser would have constituted a result for the taxpayer. Perhaps unsurprisingly, once the court had engaged the anti-avoidance provisions they found without too much difficulty that PBL was the correct purchaser. The taxpayer was therefore on the hook.

To make matters worse, the amount that should properly be treated as the consideration was the highest possible amount payable. In theory this would have been £1.25 billion, but because that amount was never in fact drawn down, the highest amount actually paid (after currency conversion had been taken into account) was £959m as this was the initial tranche of consideration provided to secure the transfer by the MOD. Still a hefty tax bill.

Other arguments

The court also addressed human rights arguments around whether the effect of the anti-avoidance provisions was to discriminate against Shari’a compliant funding and a line of argument that had come out of the blue (pardon the pun) following an article written by Julian Farrand (partner of Lady Hale) that the entire transaction could/should be recharacterised as a simple mortgage for the purposes of applying the SDLT provisions.

On the human rights arguments, the leading judgment concludes that there is no discrimination and that if there were it could be objectively justified. Also that the anti-avoidance legislation has a built in exemption to prevent it being triggered by a structure which relies purely on the Shari’a compliant SDLT provisions.

On the Farrand article it is clear that neither of the parties argued in support of the property law analysis, so it would have been a stretch for the court to take that line. In fact the judgment prefers the explanation that parliament chose to recognise the separate steps of a Shari’a compliant transaction in putting together the SDLT provisions.

Points to note

As stated above, this is a significant judgement, so there is a lot to take on board. In addition to the aspects discussed above, there are a few points which people are perhaps not yet focusing on closely enough.

DV3 is still good law. It concerns provisions which are no longer in force, and there are parts of the Project Blue Supreme Court judgment which cast some doubt on its reasoning. But overall, cases which settled on the basis of DV3 have not been given grounds for revisiting those settlements. For cases which were awaiting the outcome of Project Blue, the situation may not be clear cut. Many of those will concern similar schemes or schemes which relied on subsale relief and another exemption provision other than Shari’a financing. Those that relied on a different exemption provision may take heart from this decision. After all, it was crucial to the ratio that the Shari’a exemption provisions looked to a ‘real world’ rather than ‘SDLT world’ analysis of who the vendor was. This might be difficult to say of certain other exemptions. So there could be other schemes that were put in place where the conclusion of applying DV3 is that the scheme could not have worked and therefore that if HMRC did not pursue the correct taxpayer, the anti-avoidance may not be available to help them.

There really is no motive test in the SDLT anti-avoidance legislation. This will spread fear amongst taxpayers and extreme caution amongst advisers who will start to be anxious about a mechanical application of the anti-avoidance wherever a multi-stage transaction leads to an SDLT saving compared to a transaction which could have transferred a land interest more directly. The need for HMRC guidance on this is now keener than ever, but if the mechanical application is demanded by the Supreme Court then will the guidance be able to offer much comfort? Certainly the so called ‘safety valve’ (para 77 of the judgment) by which the Treasury can disapply the anti-avoidance (including retrospectively) will not really reassure taxpayers.

One positive answer may come from the clear aim of the court to apply the anti-avoidance ‘purposively’. In their discussions over the identification of the purchaser in particular it can be seen that they are looking to ascertain the aim of the legislation and to apply it accordingly. So perhaps the correct approach to applying the provisions should be to ask whether parliament would have intended the anti-avoidance provisions to apply to a given set of steps. Clues can be found in the exemptions which are built into the anti-avoidance (such as the exemption aimed at transferring property owning companies) but the answers will still not be straightforward and will require experienced advisers.

Finally, there is still frustration about the increasing dichotomy of tax legislation from the real world. This judgment depended on taking a ‘real world’ rather than ‘SDLT world’ approach to the Shari’a financing provisions whilst at the same time noting that parliament had respected the various steps and legislated for the SDLT impact of those. It is a great shame that we have to consider in great detail legislation about transfers of land – ‘real’ property – in those uncertain terms.

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Judgment in the case of R (Steinfeld & Anor) v Secretary of State for International Development [2018] UKSC 32 is here.

Often, the road to equality is long and arduous, just ask the same-sex couples who had to wait until the Marriage (Same Sex Couples) Act 2013 for recognition of the right to marry or those whose right to legal recognition will still feel a long way off. On any view, the road to equality in civil partnerships will be shorter. But that route has had its own difficulties and the significance of the success of this appeal should not be underestimated.

The appeal started out as a judicial review that was dismissed at first instance on the basis that the right of different-sex couples to have equal access to civil partnerships was not even within the ambit of ECHR, art 8. In the Court of Appeal, the Government stood squarely behind that argument. The court unanimously disagreed. Arden LJ, in the minority, went further still and found that the Claimants had been unlawfully discriminated against. However, she declined to grant a declaration of incompatibility for fear of “micro-managing” policy decisions. Beatson and Briggs LJs agreed that the Claimants had been discriminated against, warned the Government that the “the status quo cannot be maintained for long” but concluded that the discrimination was justified on account of the Government’s need to “wait and evaluate” how it would remedy the situation. From that empiric victory comes a resounding one.

On the first day of the Supreme Court hearing, the Government conceded that civil partnerships fell within the ambit of art 8; that there was a difference in treatment between same-sex couples and different sex couples in relation to the availability of civil partnerships; that this difference in treatment was on the grounds of sexual orientation, a ground falling within art 14; and that the appellants were in an analogous position to a same-sex couple who wish to enter into a civil partnership. Therefore, the sole issue was whether or not that difference in treatment could be justified (para [19]).

As Lord Kerr emphasised, at para [9] the Government knew when it introduced civil partnerships legislation on the terms that it did that it was perpetrating unequal treatment. This was said to be justified on familiar themes – much was made of the “sensitive issues of social policy” that were at stake for example. The Government also relied heavily on the apparent lack of consensus which had emerged following to public consultations on the future of civil partnerships and evidence which suggested that the numbers of same-sex couples entering into civil partnerships had declined so markedly, particularly following the MSSCA 2013, that they could be abolished. But the Government said it could not decide what to do just yet because it needed to collect more data. Indeed, shortly before the hearing, the Government published its latest policy paper, referencing four areas in which it would seek further responses from the public.

One striking omission from “The Future Operation of Civil Partnership: Gathering Further Information” is any proposal to consult on the views of heterosexual couples about civil partnerships. The paper more than slightly misses the point. The steps it proposes have nothing directly to do with those who were affected by the unequal treatment. This was indicative of a critical floor in the Government’s argument on legitimate aim.

The Government no longer argued that the discrimination itself was defensible. It just wanted more time to “wait and evaluate”. With the help of Counsel for the Appellants, Lord Kerr resoundingly put paid to that idea. At [42] he said this (emphasis added):

“[w]hat has to be justified is not the measure in issue but the difference in treatment between one person or group and another”. To be legitimate, therefore, the aim must address the perpetration of the unequal treatment, or, as Ms Monaghan put it, the aim must be intrinsically linked to the discriminatory treatment. In this case it does not and is not. The [Secretary of State] does not seek to justify the difference in treatment between same sex and different sex couples.  To the contrary, it accepts that that difference cannot be justified. What it seeks is tolerance of the discrimination while it sorts out how to deal with it. That cannot be characterised as a legitimate aim.”

He was similarly quick to dispatch the argument that sensitive policy issues should deter the court from issuing a declaration of incompatibility, pursuant to Human Rights Act 1998, s 4. Quite the reverse, said Lord Kerr, “in the circumstances, of this case, it would be wrong not to have recourse to that power” (para [61]).

The Supreme Court has made it emphatically clear that the status quo cannot be maintained and it never should have been (para [50]). Of course, a s 4 declaration neither requires the Government to take action nor affects the legality of the current legislation. Unsurprisingly, that has caused consternation in some quarters. After all, if there is an ideal case in which the courts ought to be able to strike down legislation it is surely one in which the Government and the legislative must be taken to have known that they were creating a “new form of discrimination” (para 46) (the cruel irony they did so whilst simultaneously offering civil partnerships in appeasement of marriage inequality will be lost to no one). Sadly, we are not in an ideal situation.

Marriage is not for everyone. Rebecca Steinfeld and Charles Keidan represent a growing number of people who are deeply opposed to what they see as the pervasive patriarchal trappings of marriage. Except where convicted prisoners are concerned, Governments of all colours have taken appropriate remedial steps to respond to a s 4 declaration. One way of doing that here would be to abolish civil partnerships altogether – as recently as May, the Government remained open to that possibility. That of course, would leave marriage as the only means of legal recognition of one’s relationship, with all the consequences that would flow from that. Fortunately, and I suspect in light of the widespread public support for this appeal, that would seem unlikely.

In the last couple of weeks, the Equalities Minister Penny Mourdant MP declined an opportunity to re-affirm the possibility of abolition and has reportedly given a private assurance that civil partnerships will not be abolished, to Stonewall, who have also welcomed the success of this appeal. It is then surely a question of when, not if the law will give equal recognition to same-sex and different-sex couples; those that wish to marry and those that do not.

This appeal is another important staging post in the extension of legal recognition to those who fall outside recognised norms. The glare of this success should now shine a light on those who remain left behind.

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On appeal from: [2017] EWCA Civ 81

The appeal considered whether the bar on different-sex couples entering into civil partnerships breaches the appellants’ rights under ECHR, art 8, in conjunction with art 14.

The Supreme Court unanimously allowed the appeal, issuing a declaration of incompatibility in respect of the Civil Partnerships Act 2004, ss 1 and 3 with the ECHR to the extent that they preclude an opposite sex couple from entering into a civil partnership.

When Parliament enacted the Marriage (Same-Sex Couples) Act 2013, it consciously decided not to abolish same-sex civil partnerships or to extend them to different-sex couples, despite recognising that this would bring about an inequality of treatment between those in same-sex partnerships and those of different sexes, and that this inequality would be based on the sexual orientation of the two groups. The Government considered that time was required and that it should not take a final decision on the future of civil partnerships until societal attitudes to them became clearer after same-sex marriages had taken root. However, consultations since this point have failed to produce a consensus as to how, or if, the legal position relating to civil partnerships should change and as such the Government decided that there should be further investigation.

The Supreme Court rejected the respondent’s argument that ECtHR case law requires a wide margin of appreciation in relation to the timing of legislative change to recognise different forms of relationship, holding that the concept of a “margin of appreciation” as applied by the ECtHR has no application in domestic law – a national court must confront the interference with an ECHR right and decide whether it is justified. The Court considered that to create a situation of inequality and then ask for time – in this case several years – to determine how that inequality is to be cured is less obviously deserving of a margin of discretion. It concluded that tolerance of discrimination while the respondent determines how best to remedy it cannot be characterised as a legitimate aim. Even if it were, a fair balance between the appellants’ rights and the interests of the community has not been struck because the interests of the community in denying civil partnerships to different-sex couples who do not wish to marry are unspecified, whereas the consequences of this denial for such couples may be far-reaching.

For judgment, please download: [2018] UKSC 32
For Court’s Press Summary, please download: Court’s Press Summary
For a non-PDF version of the judgment, please visit: BAILII

To watch the hearing, please visit: Supreme Court Website (15 May 2018 morning session) (15 May 2018 afternoon session)

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Hearings in the Supreme Court are now shown live on the Court’s website.

On Monday 25 until Tuesday 26 June, the Judicial Committee of the Privy Council will hear the appeal of Skandinaviska Enskilda Banken AB (Publ) v Conway & Anor (as joint official liqidators of Weavering Macro Fixed Income Fund Ltd) (Cayman Islands). This appeal will consider whether certain payments made following receipt of share redemption notices constitute preferences contrary to the Cayman Islands Companies Law, s 145(1). This will be heard in Courtroom 3.

On Tuesday 26 until Wednesday 27 June, the Supreme Court will hear the appeal of In the matter of an application by Geraldine Finucane for Judicial Review (Northern Ireland). This appeal will consider whether the respondent’s decision to appoint Sir Desmond de Silva to conduct a review into the murder of Patrick Finucane rather than to hold a public inquiry into the murder of the appellant’s husband was taken in accordance with the stated decision making process or whether it was a sham process and/or whether the outcome was pre-determined. The appeal will also consider whether the appellant had a substantive legitimate expectation that a public inquiry would be established, whether any expectation was frustrated by the respondent and, if so, whether the frustration was justified. Finally, it will consider whether the failure to establish a public inquiry into the murder of the appellant’s husband is compatible with ECHR, art 2. This will be heard in Courtroom 2.

On Wednesday 20 June, the Supreme Court will hand down the judgment in R (Steinfeld & Anor) v Secretary of State for International Development (in substitution for the Home Secretary and the Education Secretary). The proposed panel for hand down is Lord Reed, Lord Kerr and Lord Wilson. This appeal considered whether the bar on different-sex couples entering into civil partnerships breaches the appellants’ rights under ECHR, art 14 together with art 8.

On Thursday 28 June, the Supreme Court will hear the appeal of Warner v Scapa Flow Charters (Scotland). This appeal will consider whether, on a correct reading of the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea 1974, art 16, the Prescription and Limitation (Scotland) Act 1973, s 18(3) operates as a ‘suspension or interruption’ so as to protect the claim made on behalf of the respondent’s son from being time-barred. This will be heard in Courtroom 2.

A full list of the cases scheduled for the Trinity term can be found here.

The following Supreme Court judgments remain outstanding:

Keefe (by his litigation friend Eyton) v Hoteles Pinero Canarias SL, heard 7 Mar 2017.

Arcadia Petroleum Ltd & Ors v Bosworth & Anor, heard 10-11 Apr 2017.

R (AR) v Chief Constable of Greater Manchester Police & Anor, heard 21 Nov 2017.

R (Stott) v Secretary of State for Justice, heard 18 Jan 2018.

Warner-Lambert Company LLC v Generics (UK) Ltd t/a Mylan & Anor, heard 12-15 Feb 2018.

Williams & Anor v London Borough of Hackney, heard 14-15 Feb 2018.

Prudential Assurance Company Ltd v Commissioners for HMRC, heard 20-21 Feb 2018.

An NHS Trust & Ors v Y (by his litigation friend, the Official Solicitor), heard 26-27 Feb 2018.

James-Bowen & Ors v Commissioner of Police for the Metropolis, heard 6-7 Mar 2018.

Belhaj & Anor v DPP (expedited), heard 22 Mar 2018.

Commissioners for HMRC v Taylor Clark Leisure Plc (Scotland), heard 11 Apr 2018.

KO (Nigeria) v Secretary of State for the Home Department, & Or cases, heard 17-19 Apr 2018.

Goldman Sachs International v Novo Banco S.A., heard 17-18 Apr 2018.

R v AB & CD, heard 19 Apr 2018.

Banca Nazionale del Lavoro SPA v Playboy Club London Ltd & Ors, heard 24 Apr 2018.

Totel Ltd v Commissioners for HMRC, heard 25-26 Apr 2018.

In the matter of an application by Siobhan McLaughlin for Judicial Review (NI), heard 30 Apr 2018.

Lee v Ashers Baking Company Ltd & Ors (NI), heard 1-2 May 2018.

R (Hallam) v Secretary of State for Justice; R (Nealon) v Secretary of State for Justice, heard 8-9 May 2018.

R (Steinfeld & Anor) v Secretary of State for International Development (in substitution for the Home Secretary and the Education Secretary), heard 14-15 May 2018.

Owens v Owens, heard 17 May 2018.

Mills v Mills, heard 6 Jun 2018.

Darnley v Croydon Health Services NHS Trust, heard 7 Jun 2018.

Barnardo’s v Buckinghamshire & Ors, heard 11-12 Jun 2018.

Nottingham City Council v Parr & Anor, heard 13 Jun 2018.

In the matter of an application by Lorraine Gallagher for Judicial Review (Northern Ireland) and other cases, heard 19-21 Jun 2018.

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