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.)