Case Comment: Fallows v Harkers Transport (Royal and Sun Alliance, vehicle insurance)

Mr Fal­lows’ car was dam­aged by a vehi­cle owned by the defen­dants. Lia­bil­i­ty was not an issue. Mr. Fal­lows’ vehi­cle was insured by Roy­al and Sun Alliance, who sought to recov­er their costs from the defendant’s insur­ers. The costs were £1825.53. Not a large sum. How­ev­er, the defen­dants object­ed.

The rea­son for the objec­tion was that Roy­al and Sun Alliance arranged repair via a whol­ly-owned sub­sidiary, which then con­tract­ed with a sub­con­trac­tor, who actu­al­ly repaired the vehi­cle. The sub­con­trac­tor billed the sub­sidiary the sum of £1542.78. The sub­sidiary added on fur­ther costs, and billed Roy­al and Sun Alliance.

In Rom­ford Coun­ty Court, the defen­dants ques­tioned the sum claimed. It was held that, giv­en the duty to mit­i­gate, the best evi­dence of rea­son­able cost of repairs was that which RSA’s sub­sidiary nego­ti­at­ed with the sub­con­trac­tor. There was no evi­dence that RSA itself could only nego­ti­ate a high­er price. While admin­is­tra­tion costs have been allowed by the courts in the past, there are no deci­sions allow­ing them to a sub­ro­gat­ed insur­er, let alone a sub­ro­gat­ed insurer’s sub­sidary. And in coun­ter­bal­ance, there are deci­sions where admin­is­tra­tion costs have been dis­al­lowed.

The Judge (Platt J) said:

Since RSAARL is whol­ly owned by RSA the effect of these extra charges if they are paid by defen­dants is sim­ply to boost RSA Group’s prof­its beyond the actu­al cost of repair by the mar­gins insert­ed by RSAARL. I can find no basis in law for say­ing that this is a course of action which a claimant insur­er is enti­tled to take [..]. On the evi­dence the defen­dant has clear­ly estab­lished a fail­ure to mit­i­gate on the part of the claimant.

Now that this judg­ment is pub­lic, the util­i­ty of this busi­ness arrange­ment to RSA is prob­a­bly moot. Oth­er insur­ers could use the same mod­el. This how­ev­er was found to be like­ly to lead to an increase in costs to the insured mem­bers of the pub­lic of some 25%.

RSA were held liable in costs to the defen­dant — exceed­ing­ly unusu­al in a small claim. Even though they were the claimant, they almost com­plete­ly failed to com­ply with pre–action pro­to­col and with the court–ordered dis­cov­ery process. For exam­ple, the exis­tence of a for­mal invoice from the repair­er to RSA’s sub­sidiary was not dis­closed, even once its exis­tence had become appar­ent dur­ing the tri­al.

Per­mis­sion was giv­en to appeal.

Judg­ment in the case can be found on BAILII at Fal­lows v. Hark­ers Trans­port (A Firm) [2011] EW Misc 16.

Your data in the Cloud is not secure from the US Government

Data stor­age in the cloud is clear­ly the where things are mov­ing just now. Giv­en the pletho­ra of devices peo­ple have — com­put­ers at home, lap­tops and tablets on the move, smart­phones in the pock­et, it makes per­fect sense for all of a person’s devices to use a sin­gle, com­mon repos­i­to­ry for shared infor­ma­tion. Ser­vices such as Apple’s forth­com­ing iCloud at the domes­tic lev­el, and commonly–used ser­vices such as Google’s Google Apps, Salesforce.com and Microsoft’s Office 365 all store your data in their own clouds.

You’d think that this would be done with respect to Data Pro­tec­tion laws. Wrong. If the USA wants your data, the USA gets it. My friends Simon Bis­son and Mary Branscombe have the details: regard­less of Euro­pean pri­va­cy direc­tives and the UK Data pro­tec­tion act, the US see the PATRIOT act over­rid­ing these for US com­pa­nies and EU sub­sidiaries of US com­pa­nies:

That means that US gov­ern­ment can (under the aus­pices of the act) request the data of any indi­vid­ual or com­pa­ny that’s using US-owned or host­ed ser­vices, no mat­ter where that data is actu­al­ly being held. It doesn’t mat­ter if you’ve geo-locked your data, and it only resides in Euro­pean data cen­tres, it can still be req­ui­si­tioned and tak­en to the US. Yes, it’s an issue of nation­al secu­ri­ty, but when results can be found by machine learn­ing and trawl­ing mas­sive data sets (the larg­er the bet­ter), there’s a temp­ta­tion for gov­ern­ments to take all they can and more.

Undoubt­ed­ly this will lead to much hand–wringing in the EU Par­lia­ment. How­ev­er, what can be done? It is unlike­ly that the USA will give up their pow­ers.

There­fore, the only solu­tion is in the hands of indi­vid­u­als and com­pa­nies wish­ing to use cloud ser­vices — only use cloud ser­vices from wholly–EU–owned com­pa­nies host­ing your data inside the EU. While the legal pro­tec­tions you will have in those cir­cum­stances are not huge, they are bet­ter than none at all.

Oh — an after­thought. How hap­py do you now feel, if per­haps you have just giv­en a whole heap of your per­son­al infor­ma­tion to Google, dur­ing the Google Plus sign–up process?

Penalties from HMRC and reasonable excuses

For a long time, HMRC have tak­en the view that where the law allows a “rea­son­able excuse” for the late fil­ing of a return — be that a self-assess­ment per­son­al tax return, Cor­po­ra­tion Tax return, VAT return or PAYE return — the rea­son­able excuse must relate to an event or sit­u­a­tion that was excep­tion­al and unfore­see­able. Ordi­nary fail­ings or mis­un­der­stand­ings were not enough.

We are def­i­nite­ly see­ing, how­ev­er, a change in atti­tude from at least one Tri­bunal judge. In Col­in Humphreys v Rev­enue & Cus­toms [2011] UKFTT 98 (TC), the tri­bunal said (at para. 8):

HMRC con­tends that if the appel­lant is to estab­lish that he has a “rea­son­able excuse” for the late pay­ment he must show that excep­tion­al cir­cum­stances exist. That is not the test stip­u­lat­ed by the leg­is­la­ture. The words “rea­son­able excuse” are ordi­nary Eng­lish words to be giv­en their prop­er every­day mean­ing. There is no jus­ti­fi­ca­tion for the gloss that HMRC seeks to put on those words.

I notice that one of the Tri­bunal judges in that case has gone some­what far­ther then before: In Ballysil­lan Com­mu­ni­ty Forum v Rev­enue & Cus­toms [2011] UKFTT 257 (TC) the tri­bunal said (at para. 3):

I have to bear in mind that this is a case in which a penal­ty has been levied. In those cir­cum­stances the deci­sion of the Euro­pean Court of Human Rights in Jusil­la v Fin­land (73053/01) ECtHR (Grand Cham­ber) is high­ly mate­r­i­al. The Court decid­ed that a penal­ty or sup­ple­ment charged by the rev­enue author­i­ties of a mem­ber coun­try is in the nature of a crim­i­nal penal­ty and thus any pro­ceed­ings in respect of it attract the pro­vi­sions of arti­cle 6 ECHR (right to a fair tri­al). Thus, in my judge­ment, it is for HMRC to sat­is­fy me to the crim­i­nal stan­dard, so that I can be sure, that the required fil­ing did not take place.

So, we have a two-pronged attack here on HMRC’s insis­tence that an excuse must be excep­tion­al: first­ly, an ordi­nary read­ing of the enact­ing leg­is­la­tion (Sched­ule 55 of the Finance Act 2009) must be under­tak­en as the words “rea­son­able excuse” are not used with a spe­cif­ic def­i­n­i­tion. And since the Euro­pean Court of Human Rights have held that a penal­ty to make a return is essen­tial­ly crim­i­nal in nature, it requires a crim­i­nal lev­el of proof.

I wouldn’t be sur­prised if we see a first-stage tri­bunal deter­mi­na­tion based on one or the oth­er of these points appealed. I per­son­al­ly am hap­py with the rul­ing based on the def­i­n­i­tion of “rea­son­able excuse” — the phrase is clear, and I do not believe it to be ambigu­ous. Look, for exam­ple, at “rea­son­able doubt” — a phrase that has been clear­ly under­stood in crim­i­nal cas­es for a very long time.

I’m not so sure though about the Jusil­la point. It seems to me to be a fair­ly inter­pre­tive read­ing of the case. One point, though, does jump out at me: the Grand Cham­ber (at paras 32–34) con­cern them­selves with the pro­por­tion­al­i­ty of the penal­ty. They have no prob­lems with 10% (with a cap at some lev­el), they do seem to have a prob­lem with a fixed sum that is not in pro­por­tion to the tax owed.

It may be, ulti­mate­ly, that “rea­son­able excuse” gets a legal rede­f­i­n­i­tion, either judge-made or in statute, but fixed penal­ties get changed into per­cent­age penal­ties. This may be of some advan­tage to the indi­vid­ual or small busi­ness: it may reduce the penal­ties on small errors. That seems fair to me.

Instant Messenger Conversation Modifies Contract; Signed With ‘Awesome’

This isn’t a UK case, but I could see the same hap­pen­ing here — as the arti­cle states, all the ele­ments of a con­tract seem to be present:

Instant Mes­sen­ger Con­ver­sa­tion Mod­i­fies Con­tract; Signed With ‘Awe­some’:

Many peo­ple don’t quite real­ize that almost any kind of “agree­ment” can be seen as an enforce­able con­tract in the eyes of the courts. While some peo­ple think a con­tract has to involve a full writ­ten doc­u­ment and sig­na­tures, that’s often not true at all. Take, for exam­ple, a case involv­ing affil­i­ate sales of e-cig­a­rettes, in which a writ­ten con­tract was deemed to be mod­i­fied by a sim­ple instant mes­sen­ger con­ver­sa­tion. The affil­i­ate com­pa­ny, CX Dig­i­tal, want­ed to remove the con­trac­tu­al lim­it of 200 refer­rals per day for sales of Smok­ing Everywhere’s e-cigs, and the fol­low­ing IM con­ver­sa­tion ensued:


[CX] (2:50:08 PM): We can do 2000 orders/day by Fri­day if I have your bless­ing

[CX] (2:52:13 PM): those 2000 leads are going to be gen­er­at­ed by our best affil­i­ate and he’s legit

[Smok­ing Every­where]: is avail­able (3:42:42): I am away from my com­put­er right now

[CX] (4:07:57 PM): And I want the AOR when we make your offer #1 on the net­work

[Smok­ing Every­where] (4:43:09 PM): NO LIMIT

[CX] (4:43:21 PM): awe­some!

Smok­ing Every­where then tried to bail out on pay­ing CX the affil­i­ate fees owed, and claimed (among oth­er things) that this didn’t rep­re­sent an actu­al mod­i­fi­ca­tion of the con­tract which had the 200 per day lim­it stat­ed. The court didn’t buy it, not­ing that this is a per­fect­ly fine exam­ple of an offer, counter-offer and accep­tance, all encap­su­lat­ed in instant mes­sen­ger.

(Via Techdirt.)