Our Insights

In Google Inc v Vidal-Hall, the Court of Appeal considered whether a cause of action in “misuse of private information” was a tort, providing the claimants with a necessary gateway to permit service of their claim outside the jurisdiction under CPR PD 6B. The Court also considered the compatibility of the right to damages in the Data Protection Act 1998 (“DPA”) with EU law.

In this case, Apple computer owners brought claims against Google for harvesting their internet browsing data (stored in cookies on their computers) which Google then sold to third party advertisers. Google had publicly stated, erroneously, that it did not collect such data without the user’s consent. The claimants claimed damages for distress (i) for misuse of private information; and (ii) under s. 13 DPA for breach of that Act.

The claimants had successfully obtained permission to serve their claims for misuse of private information and under the DPA outside England pursuant to CPR 3.6 and CPR PD 6B. Google appealed, arguing that: (i) misuse of private information is not a tort for the purposes of CPR PD 6B, para 3.1(9); and (ii) a claim for damages for distress under s. 13 DPA could not be brought in absence of any pecuniary loss.

The Court of Appeal held that:

• Misuse of private information is a tort for the purposes of the jurisdictional gateway in CPR PD 6B. The Court adopted Lord Nicholls’ comments in OBG Ltd v Allan [2008] 1 AC 1 and Campbell v Mirror Group Newspapers Ltd [2004] 2 AC 457, that “breach of confidence” and “misuse of private information” are now recognised as two separate causes of action. This is despite “misuse of private information” having arisen within the scope of “breach of confidence” as a domestic implementation of privacy rights contained in the European Convention on Human Rights. The Court considered that, once “misuse of private information” is viewed as its own cause of action it is clearly “a civil wrong without any equitable characteristics … [and] there is nothing in the nature of the claim itself to suggest that the more natural classification of it as a tort is wrong”. The Court also noted that classifying “misuse of private information” as a tort did not create a new cause of action, but rather gave the correct label to an existing cause of action.
• S. 13 DPA did not, on its face, permit the recovery of damages for distress in absence of any pecuniary loss (the claimants admitted that they had not suffered pecuniary loss). However, Article 23 of EU Directive 95/46/EC on protecting the processing of personal data did permit individuals to obtain compensation for breaches of privacy causing them “non-pecuniary loss”, in light of Leitner v. TUI Deutschland GmbH & Co KG [2002] ECR I-2631. On its literal meaning, s. 13(2) had not effectively transposed Article 23 into English law. The Court therefore had to consider whether it was possible to read s. 13(2) compatibly with Article 23. The Court found that, under the Marleasing principle, it could not, because: (i) s. 13 was a “central feature” of the DPA; (ii) Parliament had clearly intended to enact a narrower right to damages for non-pecuniary loss than Article 23; and (iii) to read s. 13 compatibly with Article 23 would subvert Parliament’s intention.
• S. 13(2) could, however, be disapplied on the grounds that it conflicts with rights guaranteed by the EU Charter of Fundamental Rights to private and family life and protection of personal data. The Court adopted the test in Benkharbouche v Embassy of Sudan [2015] EWCA Civ 33, which requires domestic courts to disapply domestic provisions which conflict with the Article 47 requirement to provide an effective domestic law remedy for breach of EU law rights, unless that would require the court to redesign the fabric of the legislative scheme. In this case, the Court held that it was possible to disapply s. 13(2) without devising a new legislative scheme.

Google Inc. v Vidal-Hall [2015] EWCA Civ 311, 27 March 2015

The Modern Slavery Act 2015, the first statute of its kind in Europe, received Royal Assent on 26 March 2015. It creates an obligation on commercial entities to disclose their supply chains so as ensure the absence of slavery and trafficking.

In particular, section 54 of the Act requires a commercial organisation that supplies goods or services to prepare a slavery and human trafficking statement for each financial year. This obligation applies if the organisation has a total turnover of not less than an amount prescribed by regulations to be made by the Secretary of State.

The declaration entails a statement of the steps that the organisation has taken during the financial year to ensure that slavery and human trafficking are not taking place in any of its supply chains and in any part of its own business, or alternatively a statement that the organisation has taken no such steps.

This disclosure duty is enforceable by the Secretary of State by way of civil proceedings in the High Court for an injunction or, in Scotland, for specific performance of a statutory duty under section 45 of the Court of Session Act 1988.

Modern Slavery Act 2015

The Privy Council has unusually overturned the findings of fact of a lower court in a case involving a decision regarding the honesty or otherwise of certain corporate transactions.

The case involved transfers of loans and interests in companies in return for shares and Global Deposit Receipts. The transferor was an asset management fund, and the transferee was a company. The fund argued that the defendants (including the company) had dishonestly assisted breaches of trust by one of the fund’s investment advisers. The trial judge and the Court of Appeal rejected these arguments, but the Privy Council held that there had in fact been such dishonesty.

The Privy Council found as follows:

• It would generally decline to interfere with a lower court’s findings of pure fact, except in very limited circumstances (for instance miscarriage of justice or violation of a principle of law or procedure – Devi v Roy [1946] AC 508). However, this general principle did not always preclude an appellate court from intervening.
• The present was an an exceptional case, falling outside the scope of the general principles. The circumstances here were similar to those in Armagas Ltd v Mundogas SA (The “Ocean Frost”) [1985] 1 Lloyd’s Rep 1. There, Goff LJ had “found it essential in cases of fraud, when considering the credibility of witnesses, always to test their veracity by reference to the objective facts proved independently of their testimony, in particular by reference to the documents in the case, and also to pay particular regard to their motives and to the overall probabilities”.
• Whether the respondents dishonestly procured or assisted in a breach of trust should be assessed in the light of their conduct and actual state of knowledge at the relevant times. Moreover, if objectively no honest person would in that light have acted as they did, it was unnecessary to show that the respondents actually recognised that what they were doing was dishonest (Barlow Clowes International Ltd v Eurotrust International Ltd [2005] UKPC 37).
• Consequently, the question here was whether the respondents could honestly have believed that their actions were in the interests of the company; in other words, whether they could have believed that the Global Deposit Receipts and shares were worth what the company had paid for them. Both lower courts had failed to address this key question, and had not probed the witnesses’ evidence on why the transactions could or could not have been in the company’s interests.
• Having found that the defendants had behaved dishonestly, the Privy Council held that the fund was entitled to recover the value of the amount paid for the Global Deposit Receipts and shares ($191m).

Central Bank of Ecuador and others v Conticorp SA and others (Bahamas) [2015] UKPC 11, 23 March 2015

The Privy Council has confirmed the test for determining whether a recipient bank had constructive notice of a proprietary right, where the bank should have inquired about the likely existence of the right.

The case concerned the proceeds of a sale of antiques paid into the bank. The antiques belonged to the respondent, and had been sold fraudulently by a third party using a network of corporate entities. The respondent had a proprietary claim to the proceeds of sale.

The Privy Council held as follows:

• The test had been set out in Sinclair Investments (UK) Ltd v Versailles Trade Finance Ltd [2011] EWCA Civ 347: on the facts known to the bank at the time it received the payment, did it have notice of the proprietary right? To determine this, the court had to consider whether a reasonable person with the bank’s attributes should either have appreciated that a proprietary claim probably existed or should have made inquiries which would have revealed the probable existence of such a claim.
• The bank should make inquiries if there was a serious possibility of a third party having such a right (i.e. if the facts known to the bank would give a reasonable banker in the position of the particular banker serious cause to question the propriety of the transaction).
• If there were features of the transaction such that, if left unexplained, they were indicative of wrongdoing, then an explanation should be sought before it could be assumed that there was no such wrongdoing. In the present case, on the facts actually known to the bank, there was no apparent explanation of the structure of the transactions (unless it was to conceal the origin of the funds).

Credit Agricole Corporation and Investment Bank v Papadimitriou (Gibraltar) [2015] UKPC 13, 24 March 2015

On 23 March 2015, in an application to set aside a freezing injunction the Commercial Court (Flaux J) held that a solicitor for the Republic of Djibouti had deliberately misled the court.

The case concerned Mr Boreh, who had been convicted on terrorism charges by the Djibouti Court of Appeals. The conviction was based (inter alia) on the content of certain telephone calls said to have taken place the day after the terrorist attack. Djibouti’s solicitor, Mr Gray, learned that the transcripts of the calls had in fact taken place the day before the terrorist attack. Mr Boreh’s conviction was consequently unsafe. Djibouti sought the extradition of Mr Boreh from UAE and also applied for a freezing injunction against Mr Boreh, which was granted by the Commercial Court.

The facts of the case are complex. In summary, Flaux J held as follows:

• The standard of proof was the civil standard of the balance of probabilities, but where an allegation was made of deliberate misconduct or dishonesty, the court would only conclude that the allegation was made out if there was cogent evidence to that effect (Lord Nicholls of Birkenhead in In re H (Minors)[1996] AC 563).
• The facts of the case showed that Mr Gray had failed to bring the issue of the wrong dates to the court’s attention at the injunction application hearing, in circumstances where he knew of this issue and appreciated its importance for the case, meaning that it would render the conviction unsafe.
• In the context of an application for an injunction such as the present, where the failure to make full disclosure was deliberate and conscious the freezing order could not stand. The misconduct had not been exclusively and solely that of the solicitor; Djibouti had been aware of and agreed with the strategy to conceal the real date of the telephone transcripts from the court.

Boreh v Republic of Djibouti and others [2015] EWHC 769 (Comm), 23 March 2015

On 18 March 2015 the European Commission presented a package of tax transparency measures as part of its agenda to tackle corporate tax avoidance and harmful tax competition in the EU.

According to the official press release, the Tax Transparency Package aims to ensure that Member States are equipped with the information they need to protect their tax bases and effectively target companies that try to escape paying their fair share of taxes.

The package includes a legislative proposal introducing the automatic exchange of information between Member States on their tax rulings and a communication outlining a number of other initiatives to advance the tax transparency agenda in the EU.

The legislative proposal is a Council Directive amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation.

Directive 2011/16/EU provides for mandatory spontaneous exchange of information between Member States in five specific cases and within certain deadlines. However, the efficient spontaneous exchange of information in respect of advance cross-border rulings and advance pricing arrangements is hindered by several important practical difficulties (for instance the discretion permitted to the issuing Member State to elect which other Member States should be informed).

The proposal provides for mandatory automatic exchange of advance cross-border rulings and advance pricing arrangements. This would include communication of a defined set of basic information to all Member States, with the Commission adopting measures necessary to standardise the communication. Member States should also exchange the basic information to be communicated with the Commission.

On 18 March 2015 the Supreme Court handed down judgment in Braganza v. BP Shipping, holding that contractual decisions affecting both parties would be reviewed by the court in the same way as administrative decisions.

The case concerned death benefits accruing under an employment contract. The employee, Mr Braganza, had vanished while on board the respondents’ vessel. The respondents were of the opinion that he had committed suicide, and that no benefits were therefore due to his widow.

In the Commercial Court, Teare J had held that there was real uncertainty about what had happened to Mr Braganza, meaning whether his death had been an accident (possibly because he was out on the deck for work purposes) or suicide. The respondents’ opinion that he had committed suicide had to have been formed reasonably. Reasonableness in the present context meant Wednesbury reasonableness: the decision should have been taken rationally (by taking into account all relevant matters and not taking into account irrelevant matters), honestly and in good faith. “Although the present case concerns the exercise of a contractual power rather than a statutory power the same principles apply”. Teare J found that the respondents had failed the rationality aspect of the test and had not considered the possibility that the employee’s death could have been an accident. The widow’s claim succeeded, and death in service benefits were payable by BP under the contract.

The Court of Appeal (Longmore LJ, with whom Rimer and Tomlinson LLJ unanimously agreed) reversed this decision and held that no such benefits were payable. The court thought that it was “not entirely clear” whether Teare J had considered that the respondents’ failure to direct themselves as to the need for cogent evidence before making a finding of suicide was in itself enough to render their opinions unreasonable. As to the failure to appreciate that there might be work-related reasons for Mr Braganza to go on deck, that failure could not make the employer’s opinion unreasonable in the absence of a mechanism explaining how he could accidentally fall overboard. The widow appealed.

The Supreme Court allowed the widow’s appeal. The majority was 3 to 2 in favour of the appeal (with Lady Hale giving the lead judgment and Lord Hodge giving a concurring judgment, and Lord Kerr agreeing with Lady Hale and Lord Hodge). Lord Neuberger gave a dissenting judgment, with which Lord Wilson agreed. It was held as follows:

• There were two issues to be answered here: a particular one (the proper approach of a contractual fact-finder considering whether a person may have committed suicide) and a general one (what it meant that the decision of a contractual fact-finder should be reasonable).
• For contracts involving one party taking decisions which affected the rights of both parties, the court would imply a term into the contract that the decision-making process be lawful and rational in the public law sense: i.e. that the decision was made rationally, in good faith and consistently with the contractual purpose. Whatever term would be implied depended on the terms and context of the particular contract. The test had two limbs: the decision-making process (whether the right matters had been taken into account in reaching the decision) and the outcome (whether, even though the right things had been considered, the result was so outrageous that no reasonable decision-maker could have reached it).
• The particular context here was an employment contract, which was different from an ordinary commercial contract. Any decision-making entrusted to the employer had to be exercised in accordance with the implied obligation of trust and confidence. In deciding that the employee had committed suicide the respondents had not acted rationally or reasonably, in the public law sense of the decision having been formed without taking relevant matters into account. They respondents should have asked themselves whether the evidence was sufficiently cogent to overcome the inherent improbability of suicide (and it was not, as there were no positive indications of suicide here).
• Lord Neuberger (dissenting) agreed with the majority that where a contract allocated power to a party to make decisions which had an effect on both parties, the court should review the decision in the same way as administrative decisions. However, he would have held that there was a combination of reasons which could fairly be said to be sufficiently cogent to justify the finding that Mr Braganza had committed suicide.

Braganza v. BP Shipping Limited and another [2015] UKSC 17, 18 March 2015

On 18 March 2015 the Permanent Court of Arbitration in The Hague (PCA) handed down its award in the matter of the Chagos Marine Protected Area Arbitration between Mauritius and the UK.

The arbitration focused on the 2010 establishment by the UK of a Marine Protected Area (MPA) around the Chagos Archipelago, in the Indian Ocean. The archipelago is under UK administration as the British Indian Ocean Territory.

The PCA found as follows:

• It declined jurisdiction to consider Mauritius’ claim that the UK was not the “coastal State” in respect of the archipelago for the purposes of the 1982 United Nations Convention on the Law of the Sea (UNCLOS). This was because the parties’ dispute related to land sovereignty over the archipelago, and their differing views on the “coastal State” were simply one aspect of this larger dispute. The land sovereignty issue was not genuinely related to the UNCLOS (paras 207-221 of the award).
• Nor did it have jurisdiction to consider Mauritius’ alternative claim that certain undertakings by the UK had endowed Mauritius with rights as a “coastal State” in respect of the archipelago. The true “object of the claim” (Nuclear Tests (New Zealand v. France), Judgment, I.C.J. Reports 1974) was to bolster Mauritius’ claim to sovereignty over the archipelago. Therefore, this alternative claim related to the same dispute in respect of land sovereignty over the archipelago as Mauritius’ previous submission (paras 228-230 of the award).
• However, it did have jurisdiction to consider Mauritius’ claim that the UK’s declaration of the MPA was not compatible with the UK’s UNCLOS obligations. The dispute between the parties in relation to the compatibility of the MPA with the UNCLOS related more broadly to the preservation of the marine environment and to the legal regime applicable to the archipelago and its surrounding waters when it was eventually returned to Mauritius (paras 283-323).
• As a result of undertakings given by the UK in 1965 and repeated thereafter, Mauritius held legally binding rights to fish in the waters surrounding the archipelago, to the eventual return of the archipelago to Mauritius when no longer needed for defence purposes, and to the preservation of the benefit of any minerals or oil discovered in or near the archipelago pending its eventual return. In declaring the MPA, the UK failed to give due regard to these rights and breached its obligations under the UNCLOS (Chapter VI – Merits).
• There was no dispute between the parties regarding submissions to the Commission on the Limits of the Continental Shelf, and it was therefore unnecessary for the PCA to exercise jurisdiction in respect of Mauritius’ claim on this issue (paras 331-350).
• Two PCA members issued a joint Dissenting and Concurring Opinion, setting out their view that the PCA should have found that it had jurisdiction to consider Mauritius’ claims concerning the identity of the “coastal State”. The Dissenting and Concurring Opinion also expressed the view that the PCA should have exercised that jurisdiction to hold that the UK’s detachment of the archipelago from the colony of Mauritius in 1965 was contrary to the principles of decolonisation and self-determination.

Chagos Marine Protected Area Arbitration (Mauritius v. United Kingdom), 18 March 2015

On 17 March 2015 the House of Lords passed the Corporation Tax (Northern Ireland) Bill 2014-15. The government aims to pass the law before the upcoming May general election.

The Secretary of State, Rt Hon Theresa Villiers MP, has welcomed the development. The Bill provides for the creation of a Northern Ireland rate of corporation tax, thus devolving such tax from April 2017.

The main provisions that the Bill would introduce are as follows (summary from HMRC available here):

• The Northern Ireland Assembly will be responsible for setting the rate of corporation tax. It is expected that the rate will be reduced to 12.5% (if not below), to match the rate of the Republic of Ireland and thus encourage investment competition.
• The new rate will apply to Northern Ireland companies, meaning those that carry out a “qualifying trade” and pass either the SME or the large company test. Trades which are excluded and therefore not qualifying include, notably, financial activities such as lending and investing, asset management, long-term insurance (mainly life insurance), and reinsurance of both general and long-term insurance.
• Companies will treat their Northern Ireland trading activity as if it were a separate business from their activity in the rest of the UK, and apportion profits appropriately between the two.
• Regarding loss carry forward and group/consortium relief rules, similar amendments will apply. Such amendments will facilitate a potential rate differential, including the revaluation of Northern Ireland trading losses used to relieve profits arising in the UK main rate regime.

In the 2015 Budget, George Osborne confirmed that legislation will be introduced in the Finance Bill 2015 for a new tax on diverted profits coming into effect from 1 April 2015.

The tax was first announced at the Autumn Statement 2014 and in his speech the Chancellor of the Exchequer stated that it is aimed at “large multinationals who artificially shift their profits offshore”. Following consultation, the legislation has been revised to narrow the notification requirement.

There have also been changes to clarify rules for giving credit for tax paid, the operation of the conditions under which a charge can arise, specific exclusions and the application of the Diverted Profits Tax to companies subject to the oil and gas regime.