Regulatory Newsletter

“St Philips offers a user-focused approach which matches the service expectations of the large LawFirms, Local Authorities and Insurers’ Panels” - Legal 500.

Issue 6

Regulatory Law News

THE LEGAL 500 ANDCHAMBERS ANDPARTNERS UKRECOMMEND ST PHILIPS

Tim Green, Editor

Since the last edition of Regulatory Brief,the Legal 500 2011 and Chambers andPartners UK 2012 have both heaped praiseon St Philips Chambers and the regulatoryteam has been no exception.

The Legal 500 describes St Philips Chambersas a “commercially astute set with clerkswho are phenomenal at securing thebarrister clients wish to instruct.” St PhilipsChambers is said to be one of the leadingsets in the UK and a total of 38 counselfrom across St Philips are recommended inthe guide. From the regulatory teamAndrew Lockhart QC and Ben Mills areboth highly recommended for fraudmatters. Barry Berlin is said by the Legal500 to be "excellent barrister in every senseof the phrase", and is highly recommendedfor environmental offences and regulatorycrime whilst Andrew Evans is said to be “anexpert on licensing matters”. The Chambers

and Partners UK 2012 recommends a recordtotal of 55 counsel from St Philips andsingles out a number of members of the regulatory team for particularendorsement. Barry Berlin is said to be,“well regarded in the regulatory sphere andprincipally focuses on environmental andhealth and safety matters under bothdomestic and European legislation. Herecently acted for Environment AgencyWales in its successful prosecution ofCastle Cement for serious air pollution.Sources say: His analytical skills areexcellent; he reviews papers promptly andassimilates complex facts. He is also animpressive advocate who is able to presentdetailed material in a language which iseasily understood”. Barry is again praised inthe Health and Safety category where he isdescribed as a "popular prosecutor" who"frequently works with local authoritiesprosecuting Health and Safety breachesrelating to construction and food safety.He has also handled a number of fatalaccident cases, and is praised as beingaccommodating and very good in court;he's high-calibre.”

James Puzey is also highly recommendedby Chambers and Partners which statesJames is “regarded by peers as an incisiveand very able operator. He acts for both thedefence and prosecution in regulatorycases”. Naomi Gilchrist wins plaudits as “asound choice for regulatory, fraud andserious crime matters.” Vinesh Mandalia“is felt to be a leading light of the MidlandsBar. He has developed a noteworthy publicand human rights-oriented practicefocused on immigration, Court ofProtection and prison-related cases. Herecently advised on the interpretation ofregulations affecting the responsibility for

determining asylum claims”. Finally, theEditor is recommended in the Legal 500 for“complex, professional and banking fraud”and is described as a “Leader at the Bar” inChambers and Partners for “proceeds ofcrime and asset recovery work”.

I am delighted that recent events inchambers support the view of thedirectories that the St Philips regulatoryteam is going from strength to strength.The team are pleased to welcome twoexperienced regulatory practitioners to thegroup: Dr Mirza Ahmad from BirminghamCity Council and Ali Tabari from FurnivalChambers. Both are highly skilled anddetermined advocates. On September 16thnearly 200 clients attended a half-dayconference on proceeds of crime and assetrecovery where four speakers from St Philips were joined by the “POCA Czar”Trevor Millington OBE, to give a round up ofdevelopments in the fast moving area ofwork. Whilst in October the second St Philips Regulatory Week was attended byover 300 delegates as ten speakers fromacross the regulatory group provided freetraining on licensing, health and safety,environmental law, trading standards andcoronial law.

Last but by no means least, may I come tothe contributors to this edition ofRegulatory Brief. My fulsome thanks toJames Puzey, Jenny Josephs and AliTabari for three different articles eachproviding distinct insights into law andpractice in the regulatory field. May I alsogive special thanks to Ben Williams foranother welcome article, and hiscontinuing support in preparing RegulatoryBrief. I hope to see you in chambers soon.

Regulatory Brief Issue 6 23/11/11 15:01 Page 1

FORESEEABILITY ANDTHE PROSECUTION OFOFFENCES UNDER THEHEALTH AND SAFETYAT WORK ETC. ACT1974

James Puzey

With the judgment of the Court of Appealin the appeals of TangerineConfectionary Ltd and Veolia ES (UK)Ltd on 19th August 2011 it would appearthat the role of foreseeability inprosecutions under Sections 2 and 3 ofthe Health and Safety at Work etc Act1974 (“HSAW 1974”) has been clarified.The Health and Safety Executive hadargued that the requirement to prove arisk to health and safety did not involvehaving to prove a foreseeable risk andthey were unsuccessful in thatcontention. However, the Court ofAppeal went out of its way to emphasisethat consideration of foreseeability wouldadd little in most cases to the question ofwhether there was in fact a risk; to saythat foreseeability was principallyrelevant to whether the employer haddone that which was reasonablypracticable to avoid or control the risk tosafety. This will, no doubt, provide somecomfort to the HSE which, in the light ofthe Supreme Court’s decision in Baker vQuantum [2011] UKSC 17, might havebeen expecting significant new hurdles toovercome in the prosecution of offencesunder Sections 2 and 3 of the HSAW1974.

THE GENERAL DUTIES UPON EMPLOYERSUNDER HSAW 1974

Section 2(1) provides:

2 - General duties of employers totheir employees(1) It shall be the duty of every employerto ensure, so far as is reasonablypracticable, the health, safety and welfareat work of all his employees.

Section 3(1) provides:

3 - General duties of employers andself-employed to persons other than

their employees

(1) It shall be the duty of every employerto conduct his undertaking in such a wayas to ensure, so far as is reasonablypracticable, that persons not in hisemployment who may be affectedthereby are not thereby exposed to risksto their health and safety.

THE INTERPRETATION OF THE GENERALDUTIES

It is the concept of risk which is key andwhich is to be prevented or controlled.There is no requirement that the risk to beguarded against has actually resulted ininjury or damage. Were it otherwise, thepurpose of the Act would be severelycompromised and this is a significantdistinguishing feature from the commonlaw duty of care in negligence.

It is for the Prosecution to prove theexistence of a risk and thereafter it is forthe Defence to show (under Section 40 ofthe Act) that they took all reasonablypracticable steps to avoid or minimise therisk. This too distinguishes the statutoryregime from the requirements on aclaimant at common law.

FORESEEABILITY

The question of how foreseeable an act iswas held by the Court of Appeal in HTMLtd [2006] EWCA (Crim) 1156 to berelevant to the question of whether allreasonable steps had been taken to avoidit. The Court of Appeal expressed itself invery closely confined terms in allowing inconsiderations of foreseeability of risk,aware no doubt of the danger ofequating the statutory duties with thecommon law of negligence.

The Court of Appeal stated, in terms, thatforeseeability was not a means ofpermitting a defendant to bring inconcepts of fault appropriate to civilproceedings “by the back door.”

The debate on foreseeability was,however, kept alive in the cases of R vPorter [2008] EWCA (Crim) 1271 and Rv Chargot Ltd [2008] UKHL 73 byreason of the dicta in both decisions tothe effect that the HSAW 1974 was notintended to deal with risks which were“trivial”, “fanciful” or “hypothetical” butrather with situations where there was “amaterial risk” to health and safety.

Baker v Quantum Clothing Group Ltd[2011] UKSC 17

This case and its linked cases were civilactions brought by workers who hadsuffered hearing loss due, it was claimed,to prolonged exposure to unsafe levels ofnoise by reason of their employment inthe knitting industry.

Section 29(1) of the Factories Act 1961provides as follows:

(1) There shall, so far as is reasonablypracticable, be provided and maintainedsafe means of access to every place atwhich any person has at any time towork, and every such place shall, so far asis reasonably practicable, be made andkept safe for any person working there.

Claims were brought based on breach ofthis statutory duty and for common lawnegligence where the test to be appliedwould involve whether the employer hadconsidered or should have considered thelikelihood of injury occurring (i.e. aforeseeability element).

The claimant in this case argued thatforeseeability was only relevant to theissue of reasonable practicability. LordMance disagreed (paragraphs 76 - 79). Itwas held that Section 29(1) did not movesubstantially from the common law ofnegligence, therefore it was for theclaimant to prove likelihood of danger.

Lord Dyson in agreeing with Lord Mancesaid that it would be surprising ifParliament had intended to imposeliability under Section 29(1) for a dangerthat was not reasonably foreseeable(paragraph 118). He went on to say thatit was only if a risk was reasonablyforeseeable that one had to considerwhether all reasonably practicablemeasures had been taken to avert it,(paragraph 121). Lord Saville agreed withLords Mance and Dyson.

THE APPEALS OF TANGERINECONFECTIONARY LTD AND VEOLIA ES(UK) LTD

The defendants in these appeals that wereheard together raised three arguments,two of which the Court of Appealdismissed without much ado; however,the issue of proving foreseeability of riskwas clearly in play following the Baker vQuantum judgment.

Lord Justice Hughes, giving the solejudgment, noted the reference by LordHope in R v Chargot to the word “risk” asreferring to material risks “which anyreasonable person would appreciate andtake steps to guard against”, (paragraphs

Regulatory Brief | St Philips Regulatory Law

The duty under Section 2(1) is to “ensure... the health, safety and welfare ... of allhis employees” and under Section 3(1) itis to ensure that the public are not“exposed to risks to their health andsafety.”


24 - 25). This could be given effect eitherby requiring that the risk alleged to existbe shown to be foreseeable or,alternatively, by introducingforeseeability into the question ofwhether it was reasonably practicable totake steps to avoid the risk.

His Lordship went on to reject the Crown’sattempted distinction of the Baker vQuantum decision on the grounds that itconcerned a different statutory liability,(paragraph 34). It was held that theFactories Act provision and those of theHSAW 1974 were intended to run inparallel.

The Court of Appeal held that it wasbound by the Supreme Court’s decisionand that foreseeability of risk wasrelevant to the question of whether a riskto safety existed (paragraph 36). This wasa question for the jury to consider.However, the Court of Appeal went on tostress that this would not in most casesaffect the outcome. It was stated thatthere was no requirement upon theCrown to prove that any accident thathad occurred was foreseeable. It hadalready been noted that an accident mayor may not be evidence of a risk but itwas no more than that (paragraph 14).Furthermore, it was said that the enquiryby the jury into the existence of a risk wasnot confined to risks which are obvious.

Finally, the Court of Appeal emphasisedthat consideration of foreseeability wouldmake little difference to the question ofthe existence of a risk in most cases andinstead would be more relevant to thequestion of whether the employer haddone that which was reasonablypracticable to avoid or limit the risk.

Whilst the conclusions on foreseeabilitywere probably inevitable given the Bakerv Quantum judgment, those who wereexpecting or fearing a significant newhurdle to prosecutions under Sections 2or 3 of the HSAW 1974 may well havebeen surprised at the strength of thecaveats placed on this clarification of thelaw by the Court of Appeal. However,whether this will dissuade defendantsfrom raising foreseeability of risk as anissue is another question entirely and onewhich the HSE will now have to take intoaccount in its future charging decisions.

ENVIRONMENTALPROSECUTIONS:UPDATE

Jennifer Josephs

The Environment Agency are, togetherwith some Local Authorities and otherbodies, the CPS of pollution and flytipping. Waste disposal is prosecutedunder the Environmental Protection Actand water pollution under the WaterResources Act 1991. This report looks atwhat recent cases have been decided andif there is any trend in the way that theProsecutions are treated by the Courts.

Leading authorities tend to be quite old.This is probably because not many casesget reported. There are two reasons forthis: (1) this is a fairly discrete area of lawwith limited issues and (2) many cases areheard in the Magistrates Court which, ofcourse, is not a court of record. In fact itcan be difficult for lawyers to findguidance in how to deal with such cases.

There have been three recent authoritieswhich are considered below. TheDefendants in each case fell foul of therulings of the Courts, albeit for differentreasons...

Environment Agency v Drake [2009]EWHC 1344 (Admin)

A prosecution brought under s.90(1) and(3) of the Water Resources Act 1991 inthe Magistrates' Court D had beencharged with polluting a river. The EA hadexamined the river, and taken samplesintending that they be analysedscientifically. They had been tested todestruction, and other samples wereeither lost or destroyed. Therefore theProsecution decided that the readingscould not be relied upon and the case wasbased on DVD, photos and evidence of itsofficers. This decision was made on theday of the trial, with no advance warning.

Surprisingly, an application to the DistrictJudge to stay the case succeeded! The DJruled that the nature of the case hadchanged, severe prejudice was caused tothe Defendant and there could not be afair trial. The points were obvious - D

could not get own his expert, check theveracity of samples, or see whether thewater was polluted or not. Nor could hecross-examine on the composition of thesamples.

The EA appealed the decision to stay thecase, and Sir Thane Forbes sitting as aHigh Court Judge agreed. Perhaps themost important point of his ruling to noteis this: there was no requirement on theProsecution to prove that the pollutingmatter was poisonous. It was a matter offact to be decided by the tribunal of factas to whether the water was in factpolluted. Perhaps surprisingly, he evenpointed out that there was no duty toeven take samples in the first place.Evidence of film footage, photos and eyewitness accounts proved that the waterwas polluted. The case was a reducedprosecution, not a prejudiced one. Itwould have been unfair for theProsecution to rely upon the samples thatthey had tested. There was no bad faith,which might make a finding of an abuseof process more likely. A retrial wasordered.

Regina v W, C and C [2010] EWCACrim 927

Here we have another case where theDefendant succeeded in getting the casestopped, only for the decision to bereversed on appeal. This case arose out ofa crown court trial, in which the Judgeaccepted a submission of no case toanswer and directed that the jury returnverdicts of not guilty. The Court of Appealdisagreed.

The Defendants were the owners andmanagers of a farm in a “Special Area ofConservation” who had paid about £25kto have the soil and subsoil which wasbeing extracted from the neighboursdeposited onto their land. The neighbourswere constructing a new hotel. TheDefendants used the material to create ahorizontal platform to raise the land tobuild a cattle shed. They did not have awaste management license and in factthe district council did not believe thatthe activity was waste disposal (so alicence was not needed). However, acouple of months later, EA officers visited,


Points to note:

• no duty to take samples to prove thata river is polluted

• no requirement that a polluting matteris poisonous or noxious

• an abuse of process is unlikely to beestablished when the Prosecution haveacted in good faith.

For more information on St Philips Regulatory Groupplease visit our website www.st-philips.com



and took the view that a license wasrequired. An application was made forexemption from the licensingrequirements but it was made late andappeared to massively understate theamount of material that had in truthbeen deposited.

Submissions were made that the Crownhad failed to establish (a) that thematerial was waste and (b) that it wascontrolled waste. The judge agreed onboth counts. He ruled that it was for thejudge to decide whether the material wascapable of being controlled waste and ifso for the jury to decide if in fact it was.

The Court of Appeal agreed with thisanalysis. However, they disagreed with hisruling that the material was not capableof being controlled waste.

The judge had been heavily and undulyinfluenced by the fact that the materialwas valuable and immediately put to use.The Court of Appeal agreed that it was arelevant factor but could not be entirelydeterminative of the status of thematerial. They confirmed that excavatedsoil was capable of being waste, ordinarilywas waste, and having become waste itremained waste until somethinghappened to alter that. Whether thatevent had happened was a question offact for the jury.

Possible re-use did not change the statusof the waste. Actual re-use might alterthe status of the waste but only if thatuse was consistent with the aims andobjectives of the Act, especially theavoidance of harm to people or theenvironment (here a conservation area).Ultimately, it was a matter for a jury.Furthermore, if material is waste, theburden is then on the Defendant to provethat it is not “controlled waste”.

O'Grady Plant and Haulage Limited,Paul O'Grady, Sarah O'Grady v LondonBorough of Tower Hamlets [2011]EWCA Crim 1339

This is a recent case involving a s.33prosecution, and also the WasteManagement Licensing Regs 1994,regulation 17 under which an exemptionfrom requiring a license can be granted.Here, the prosecution was brought not bythe EA but the council. The jury hadconvicted the Defendants. TheDefendants launched an appeal on avariety of grounds but for these purposesthe important ones were a) they wereexempt from requiring a license and b)the judge had intervened too much andunfairly.

The Defendants had acquired a site to useas a haulage depot, and a condition wasthat the remaining building would bedemolished and cleared when they gavethe site up. They were grantedexemptions under the wastemanagement licensing regulations.

There were complaints about theactivities on site to the local authority’senvironmental dept. In fact the localresidents suffered from some pretty awfulconditions including the presence ofnoxious and acrid smoke, dust and noise.They could not open their windows whenit was hot without being flooded withdust, and asthma sufferers in particularbecame quite ill.

The prosecution case alleged that the Dwas bringing rubble onto the site andcrushing it. The defence was (1) that thebuilding was being demolished, and (2) inany event, they had an exemption fromrequiring a license.

As to whether the rubble was beingbrought onto site - obviously this was alarge issue of fact. The summary of thefacts indicates that there was prettystrong evidence that there were lorryloads of broken concrete being dumpedat the site. The defence includedallegations of a conspiracy andfabrication of evidence. The Jury did nottake long to convict.

But the Defence argued that even ifwaste was brought onto the site, theexemption applied. This might beconsidered to be a somewhat cheekyargument! It certainly did not find favourwith the Court of Appeal. They approvedof the trial judge’s direction to the jury onthis point. The exemption from requiringa licence applied so long as the partyabided by the terms of the exemption -and in addition, it would not apply if theactivity was not consistent with the needto ensure that waste is recovered ordisposed of without endangering humanhealth and without using processes ormethods which could harm the

environment (see reg 17(4)).

Once again the Court made it clear thatquestions of fact are for the jury.

As to the behaviour of the judge – shewas criticised for excessive and improperintervention. Here, it seems that theevidence had a lot of holes in it and sheasked the questions that filled it. TheCourt of Appeal made it abundantly clearthat a judge asking pertinent questionsdoes not provide a Defendant with anappeal. Nor is curtailing repetitive andirrelevant cross examination consideredto be unfair. Nor is intervening and askingquestions of the Defendants in evidence –described by the Appellant’s counsel as“raising doubts and fishing around in achallenging manner!” The Court describedthe judge as posing questions in a neutralfashion about essential points that thejury were bound to consider. They couldnot see anything wrong in the manner ofthe questioning and dismissed thisground too.

Points to note:

• Matter for jury to decide if material iswaste.

• the intended use for the material is farfrom the determining factor, nor is theactual reuse.

• Having a successful half timesubmission in the Crown Court is nolonger necessarily the end of the matteras terminating rulings can be appealed.

Points to note:

• An exemption does not give carteblanche to dispose of waste

• an exemption still requires humanhealth and the environment to beprotected

• If advocates miss important points, aJudge can chip in.

• complaining about the judge withoutgood reason is pointless and likely toirritate the Court.

Overall Conclusions

Some general points can be gleanedfrom reviewing these latest authorities,all of which resulted in findings thatwere against the Defendant.

• Questions of fact are for thejury/magistrates.

• Only in extreme cases will prosecutions be stayed or halted.

• Appellate courts will be slow tointervene in convictions where thetribunal trying the case has beenproperly directed and left in charge ofthe facts.



STATUTORY NUISANCE:A NUISANCE OF ASTATUTE?

Ali Tabari

Birmingham Magistrates’ Court recentlyheard a 9-day private prosecutionbrought by a tenant [‘G’] against the citycouncil [‘BCC’], the lettings agents [‘E’]and the landlord [‘A’] under s.82Environmental Protection Act 1990. Thecase involved a voyage of discoverythrough the often-vague EPA and itsrelated case-law, which offered preciouslittle guidance. Some of the issuesexplored are summarised below.

Who is an ‘owner’?

Uncontroversially, A admitted that he wasan ‘owner’ of the property for thepurposes of s.82 EPA and therefore liableto a prosecution under s.82 EPA. Relyingon the authority of Camden LBC vGunby [2000] 1 WLR 465, G submittedthat BCC and E were also ‘owners’. TheDistrict Judge ruled that the issue wasfinely balanced, but found that:

• BCC was not an ‘owner’ under the EPAbecause it was only a facilitating agent, itdid not receive back rent for the property,and it was, therefore, acquitted;

• E was an ‘owner’ because its own policydocument suggested that it was amanaging agent ostensibly withresponsibilities of repair, and also becauseit operated in order to make a profit (asopposed to BCC which was only involvedin private sector housing because of itsstatutory duty to house the homeless).

The ‘person responsible’ defence

S.79 EPA defined a ‘person responsible’for a statutory nuisance as ‘a person towhose act, default or sufferance thenuisance is attributable’. The DistrictJudge found as facts that, as ‘owners’, Eand A were, prima facie, ‘personsresponsible’ under s.79.

However, the District Judge also foundthe evidence given by G and his wife attrial in relation to the defects in the

property to have been unreliable and, attimes, untruthful. He also found that A’sattempts to carry out the necessaryrepairs to the property had been thwartedby G’s unreasonable refusal to allowaccess to A’s contractors, purportedly onthe grounds of protecting the safety ofhis 8 young children.

The District Judge found that the state ofthe property constituted a statutorynuisance at the relevant times, and thatthe defects were partly structural innature. On that point, G submitted that Eand A could not raise the defence thatthey were not a ‘person responsible’ forthe nuisance, because s.82(4)(b) EPAstated that if there was a ‘structural’defect then proceedings would bebrought against the ‘owner of thepremises’, as opposed to ‘the personresponsible’.

In rejecting that submission andacquitting E and A, the District Judgefound that:

• S.82(4)(b) did not create a strict liabilityoffence, and that both E and A wereentitled to rely on the defence that theywere not a ‘person responsible’;

• It was important that G’s refusingaccess to A and his contractors wasunreasonable – given that A had madebest efforts to repair the nuisance, butwas denied the opportunity to do so, itmeant that A was no longer a ‘personresponsible’, and was, therefore,acquitted;

• On the basis of his unreasonablebehaviour, G was the ‘person responsible’,which allowed E to also be acquitted.

Power to lay an information under s.80

Before the trial had begun, BCC issuedcompliance notices to E and A under s.80EPA demanding the cessation of thenuisance. G and his family had movedfrom the property by the start of the trial,by which time neither E nor A had yetrepaired the property. Mid-way throughthe trial, and based on oral evidence fromexpert witnesses on days 4 and 5 of thetrial that the property still constituted astatutory nuisance, G applied to layfurther informations against E and Aunder s.80 EPA for their failures tocomply with BCC’s notices. This powerappeared to be reserved to localauthorities only, as s.80 only referred tothe issuing and enforcement ofcompliance notices under that section bya ‘local authority’. The EPA, ratherunhelpfully, was otherwise silent on thispoint.

E and A submitted that the tenor of theEPA suggested that s.82 was specificallydesigned for use by private individuals tobring private prosecutions, but that s.80was only for the local authority to use. Inthe present case, BCC had openlyaccepted that it had chosen not toproceed against either E or A under s.80and remained neutral on whether aprivate individual could substitute hisown discretion for that of BCC.Ultimately, the judge ruled that s.80informations could be laid on the basisthat there was no explicit statutoryrestriction on private individuals doing so,even though the tone of the EPA perhapssuggested otherwise.

A pleaded guilty to the s.80 informationon a limited basis that restricted his guiltto the period after G and his family hadvacated the property, and was fined £500.E contested the charge, but was convictedand fined £450.

Watch this space for potential appeals tothe Administrative Court on all the pointsabove. Given the lack of pertinentguidance on the issues above, it could behelpful to have some clarification fromthe higher courts, if only so thataggrieved tenants know who they shouldbe pursuing, and that Magistrates’ Courtlists are not taken up with such lengthyand complex cases.

In rejecting that submission andacquitting E and A, the District Judgefound that:

• S.82(4)(b) did not create a strictliability offence, and that both E and Awere entitled to rely on the defence thatthey were not a ‘person responsible’;

• It was important that G’s refusingaccess to A and his contractors wasunreasonable – given that A had madebest efforts to repair the nuisance, butwas denied the opportunity to do so, itmeant that A was no longer a ‘personresponsible’, and was, therefore,acquitted;

• On the basis of his unreasonablebehaviour, G was the ‘personresponsible’, which allowed E to also beacquitted.



CONSUMERPROTECTION: PURELYCREATIVE IN THECOURT OF APPEAL,AND BEYOND…

BEN WILLIAMS

Introduction

This article is based on a seminar whichformed part of Regulatory Week, held inChambers during October 2011. On 14July 2011 I had delivered a talk analysingthe decision of Mr Justice Briggs in OFT vPurely Creative Ltd [2011] EWHC 106(Ch), regarding the interpretation of theConsumer Protection from Unfair TradingRegulations 2008 (“the Regulations”); inparticular, the interpretation of para 31of schedule 1.

That judgment had been handed down on2 February 2011. Subsequently, andfollowing further rulings, the defendantssubmitted to undertakings.

The appeal to the Court of Appeal relatedto the first of the undertakings, i.e.because that undertaking had beenagreed based on one of Briggs J’s specificrulings. The OFT cross-appealed.

Judgment was given by Sir AndrewMorritt (Chancellor of the High Court),Lord Justice Jackson and Lord JusticeMunby on 29 July 2011.

Their Lordships decided to refer variousquestions to the European Court ofJustice.

Background

The Regulations seek to implement theUnfair Commercial Practices Directive2005/29/EC (“the Directive”). Article 5 ofthe Directive provides that

Annex I contains the list of thosecommercial practices which shall in allcircumstances be regarded as unfair. Thesame single list shall apply in all MemberStates and may only be modified byrevision of this Directive.

Para 31 reads:

Creating the false impression that theconsumer has already won, will win, orwill on doing a particular act win, a prizeor other equivalent benefit, when in fact either:

• there is no prize or other equivalentbenefit

or

• taking any action in relation toclaiming the prize or other equivalentbenefit is subject to the consumer payingmoney or incurring a cost.

Para 31 in Schedule 1 to the Regulationsreproduces para 31 of the Annex I to theDirective literally, except that itintroduces the indents with thereferences “(a)” and “(b)”.

I.e. it reads: Creating the false impressionthat the consumer has already won, willwin, or will on doing a particular act win,a prize or other equivalent benefit, whenin fact either—

(a) there is no prize or other equivalentbenefit, or

(b) taking any action in relation toclaiming the prize or other equivalentbenefit is subject to the consumer payingmoney or incurring a cost.

Decision

The handout from the July seminar setsout the decision in detail. Of particularrelevance is the fact that Briggs Jconcluded that paragraph 31 did notapply to payments which were de minimisin relation to the value of a ‘prize’. Heconsidered that the concept of falsity liesat the heart of the prohibition.

He also found that the offering of acheap alternative (e.g. of entering by postas opposed to via a premium rate phoneline) did not avoid engagement of theprohibition. Para 59 of the Februaryjudgment:

If the consumer is given the impressionthat he has won a prize even if he adoptsthe recommended (but relatively moreexpensive) method or methods ofclaiming it, then if the cost of thatmethod is sufficient to falsify theimpression, that commercial practiceshould be, and is, prohibited byParagraph 31. This is because the traderwill be profiting by recommending amethod of claiming which involves a costwhich falsifies the assertion that theconsumer has won something, ratherthan having bought it.

Undertakings

The first undertaking said the promoterswould not in any future promotions:

create the false impression that theconsumer has already won, will win, orwill on a particular act win a prize orother equivalent benefit, when in facttaking any action recommended by thedefendant in relation to claiming theprize or other equivalent benefit issubject to the consumer paying money orincurring a cost which is either

(a) a substantial proportion of the unitcost to the defendant of the provision tothe consumer of the thing described as aprize or other equivalent benefit; or

(b) in the case of a charge stated to befor delivery and insurance, used by thedefendant to finance in whole or in partits acquisition, handling or other cost ofthe making available of that thing otherthan the actual cost of its delivery to theconsumer and insurance (if any) intransit.

Appeals

The appeal of the Promoters contendedthat:

• Para 31(b) does not relate to costs ofsubmitting a claim (especially wherethere is a choice);

• Recommendation of a method ofclaiming did not falsify the impressionthat a prize had been won.

• The fact that the promoter stood toprofit from the process of the ‘prize’being claimed was neither decisive norrelevant.

• The relevant comparator would, ifapplicable, be the cost to the ‘prize-winner’ of obtaining the ‘prize’ elsewhere,not the cost to the promoter of obtainingit.

• The award and claim process did notconstitute a sale and purchase.

Sir Andrew Morritt said (para 14):

If these were the only issues in theseappeals I would reject the arguments ofcounsel for the Promoters and dismissthe appeal. Paragraph 31 is quite specific.It applies to “any action in relation toclaiming the prize”, not the ‘only’,‘cheapest’ or ‘recommended’ action.Similarly it applies to the consumer“paying money or incurring a cost”. This isentirely unspecific. Literally the wordsapply to any money or any cost. There isno requirement that they should besubstantial in comparison with any othercost. Taking the words of paragraph 31 at

Para 31 reads:

Creating the false impression that theconsumer has already won, will win, orwill on doing a particular act win, a prizeor other equivalent benefit, when in fact either:

• there is no prize or other equivalentbenefit

or

• taking any action in relation toclaiming the prize or other equivalentbenefit is subject to the consumerpaying money or incurring a cost.

Para 31 in Schedule 1 to the Regulationsreproduces para 31 of the Annex I to theDirective literally, except that itintroduces the indents with thereferences “(a)” and “(b)”.

I.e. it reads: Creating the falseimpression that the consumer hasalready won, will win, or will on doing aparticular act win, a prize or otherequivalent benefit, when in fact either—

(a) there is no prize or other equivalentbenefit, or

(b) taking any action in relation toclaiming the prize or other equivalentbenefit is subject to the consumerpaying money or incurring a cost.


their face value each of these promotionsinfringes the provision. In addition toimport the restrictions for which counselfor the Promoters contends would becontrary to one of the clear purposes ofthe Directive, namely “to establish a highlevel of consumer protection”, see recital5 to the Directive.

By the cross-appeal, the OFT contendedthat the Court of Appeal should either:

• Strike out the word ‘false’ in the firstline of the undertaking; and delete all thewords after ‘incurring a cost’; or,

• Do the above, but change the lastphrase to ‘incurring anything other thana de minimis cost’.

That is to say, it was argued that theimpression need not be ‘false’ and, as aprimary submission that the cost shouldbe any cost; but, in the alternative, anycost more than de minimis.

Counsel for the OFT suggested if neitherrevision seemed acceptable to the court,then it should it refer the issue to the ECJ.The court said:

We were told that there is no judgmentof any court of any Member State on theproper interpretation of paragraph 31 ofthe Directive or its various nationalequivalents. In addition the translationsof the various provisions enacted by eachMember State to give effect to paragraph31 of the Directive display a divergenceindicative of doubt as to what that trueinterpretation is.

E.g. the Irish equivalent omits the word‘false’ and refers to incurring a ‘loss’,rather than a ‘cost’.

The following are the questions for theECJ:

1 Does the banned practice set out inparagraph 31 of Annex 1 to Directive2005/29/EC prohibit traders frominforming consumers that they have wona prize or equivalent benefit when in factthe consumer is invited to incur any cost,including a de minimis cost, in relation toclaiming the prize or equivalent benefit?

2 If the trader offers the consumer avariety of possible methods of claimingthe prize or equivalent benefit, isparagraph 31 of Annex 1 breached iftaking any action in relation to any of themethods of claiming is subject to theconsumer incurring a cost, including a deminimis cost?

3 If paragraph is not breached where themethod of claiming involves the

consumer in incurring de minimis costsonly, how is the national court to judgewhether such costs are de minimis ? Inparticular, must such costs be whollynecessary:

a. in order for the promoter to identifythe consumer as the winner of the prize,and/or

b. for the consumer to take possession ofthe prize, and/or

c. for the consumer to enjoy theexperience described as the prize?

4 Does the use of the words ‘falseimpression’ in paragraph 31 impose somerequirement additional to therequirement that the consumer paysmoney or incurs a cost in relation toclaiming the prize, in order for thenational court to find that the provisionsof paragraph 31 have been contravened?

5 If so, how is the national court todetermine whether such a ‘falseimpression’ has been created? Inparticular, is the national courtrequired to consider therelative value of the prizeas compared with the costof claiming it in decidingwhether a ‘false impression’has been created? If so, shouldthat ‘relative value’ be assessedby reference to:

a. the unit cost to the promoterin acquiring the prize; or

b. to the unit cost to thepromoter inproviding theprize to theconsumer; or

c. to the value that the consumer mayattribute to the prize by reference to anassessment of the ‘market value’ of anequivalent item for purchase?

Conclusion

The Court of Appeal was clearly notimpressed by the promoters’ arguments.The Appeal was only kept alive (i.e. stayed,along with the cross-appeal), rather thanrefused straightaway, to prevent theCourt of Appeal being fettered in the actions available following the ECJ’s ruling.

Watch this space!


By the cross-appeal, the OFT contendedthat the Court of Appeal should either:

• Strike out the word ‘false’ in the firstline of the undertaking; and delete allthe words after ‘incurring a cost’; or,

• Do the above, but change the lastphrase to ‘incurring anything other thana de minimis cost’.

That is to say, it was argued that theimpression need not be ‘false’ and, as aprimary submission that the cost shouldbe any cost; but, in the alternative, anycost more than de minimis.

Counsel for the OFT suggested if neitherrevision seemed acceptable to the court,then it should it refer the issue to theECJ. The court said:

We were told that there is no judgmentof any court of any Member State onthe proper interpretation of paragraph31 of the Directive or its variousnational equivalents. In addition thetranslations of the various provisionsenacted by each Member State to giveeffect to paragraph 31 of the Directivedisplay a divergence indicative of doubtas to what that true interpretation is.

E.g. the Irish equivalent omits the word‘false’ and refers to incurring a ‘loss’,rather than a ‘cost’.


NEWSRegulatory Brief | St Philips Regulatory Law

St Philips Chambers 55 Temple Row Birmingham B2 5LSDX 723240 Birmingham 56 T: +44 (0) 121 246 7000F: +44 (0) 121 246 7001 www.st-philips.com

Winner of Regional Chambers of the Year 2005 & 2009 at theChambers UK Bar Awards.

St Philips are the only Regional Chambers to be awarded "Chambers ofthe Year" in both the Legal 500 and Chambers National Awards.

St Philips is an equal opportunities organisation.

THE REGULATORY CLERKING TEAM

Joe Wilson (Chief Clerk) – 0121 246 2136 ([email protected]) Ian Charlton – 0121 246 2168 ([email protected])Jenny Culligan - 0121 246 2178 ([email protected]) James Turner – 0121 246 2052 ([email protected])Stuart Smith - 0121 246 2065 ([email protected]) Duty Clerk (after 6pm) – 07967 975448

Messages can also be sent to counsel or the clerks via the Chambers e-mail system using the following address – [email protected]

No part of this Newsletter may be reproduced or transmitted in any form or by any means without the prior permission of St Philips Chambers. The articlesin this Newsletter represent the general opinion of the stated author. Whilst every care has been taken in its preparation, this Newsletter is intended forgeneral guidance only and does not constitute legal advice. No duty of care is hereby assumed to any person and no liability is accepted for the content. Noreliance should be placed on any of the content of this Newsletter for any purpose, which may give rise to any liability or obligation without seekingindependent advice from a qualified legal practitioner and/or checking the original text of any relevant legislation or court decision. No liability whatsoeverand howsoever arising will be accepted for any liability, loss or damage arising from the use of this Newsletter or the content of any of its pages.

ST PHILIPS WELCOMES 300 DELEGATES TO REGULATORY WEEK 2011

St Philips Chambers welcomed over 300 delegates to a rolling seminar program covering all aspects of regulatory law from licensing andtrading standards to health and safety, environmental and coronial law. Each night two speakers from the St Philips Regulatory Groupgave presentations on areas of regulatory practice. The aim was to provide clients with succinct, practical and clear advice across the fullgamut of regulatory work.

Joe Wilson, Chief Clerk said: "For the second year running Regulatory Week has been a stunning success. We have been delighted by theenthusiasm of our clients for this programme. St Philips Regulatory Group consists of 22 barristers, each a specialist in their chosen field.We provide high quality advice and advocacy to clients from across the UK."

Regulatory Week is only one of a number of training and networking events provided by the St Philips Regulatory Group. Membersprovide a full menu of seminars and are pleased to present "in-house" and to deliver bespoke events to suit a specific client need. Pleasespeak to Ian Charlton, Head Regulatory Clerk ([email protected]) or Melissa Dickinson, Business Development Manager([email protected]) to arrange a tailor made training event for your firm.

TWO EXPERIENCED TENANTS JOIN ST PHILIPS REGULATORY GROUP

St Philips welcomes Dr Mirza Ahmad to chambers. Dr Ahmad was called to the Bar 1984 and has served as the senior lawyer atBirmingham City Council for the past 11 years (he left as Corporate Director of Governance). Dr Ahmad joined the Regulatory, Public Lawand Employment Law Groups at St Philips Chambers on 1st November 2011, to focus on high level ethical and corporate governance andother legal work associated with local authorities and the public sector.

Dr Ahmad has been the Chairman of the Bar Association of Local Government and the Public Service since 1998 and was the Presidentof the Association of Council Secretaries & Solicitors in 2009/2010. He has also been a Member of the General Council of the Bar since1995 (save for 1998), and is the General Editor of ‘Knights Guide to Best Value and Public Procurement - Law and Practice’ and ‘LocalAuthority Employment: Law, Practice and Procedure’.

Dr Mirza Ahmad said: - “It is a great honour and a privilege for me to join StPhilips Chambers as it is nationally recognised as a leading set. The move to StPhilips Chambers is a strategic choice and inspired by the knowledge that it isalready exceptionally well placed to serve all local authorities and the publicsector in the UK, not just those based in the Midlands."

St Philips is also delighted to welcome Ali Tabari. Ali is developing a broadregulatory practice at St Philips Chambers, and accepts instructions across therange of the Regulatory Group's specialisms. Formerly of Furnival Chambers,London Ali has particular experience on behalf of local authorities anddefendants/appellants in environmental (fly-tipping and statutory nuisance),licensing and POCA confiscation/forfeiture work, and has appeared before theGeneral Medical Council's Fitness to Practice Panel, as well as the SpecialEducational Needs Tribunal.


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