Equitable remedies Flashcards
Co-operative Insurance Society Ltd v Argyll Stores Ltd [1998] AC 1
specific performance
Reasoning:
The conventional justification for refusal was that it would require the constant supervision of the court. But inC H Giles & Co Ltd v Morris[1972] 1 WLR 307 (Ch) 318, Megarry J had suggested that there was no objection to the ‘difficulties of constant superintendence’; the person ordered would perform because he would be punished for contempt of court otherwise. Megarry V-C had further suggested inTito v Waddell (No 2)[1977] Ch 106 (Ch) 322 that the real issue was the impossibility of enforcing terms that were too imprecise. Lord Hoffmann thought this did not meet the point—the courts would still have to make a series of rulings (at 12).
Accordingly, Lord Hoffmann set out three objections to the grant of specific performance. The first was just that. The method of enforcing the order was too blunt and heavy-handed. A long series of rulings might be required. It would be oppressive. Argyll had decided the most efficient thing to do was to close the business, but it would be subject to an order to run that business on certain terms. A ‘sword of Damocles’ would hang over it as it faced possible contempt proceedings with the threat of imprisonment of its officers (at 12–13).
Second was the cost of such constant supervision. This was in contradistinction to orders for the specific performance of a single activity. Difficulty of supervision carried less weight when the timescale was constrained (at 13), but there was clear potential for a long timeframe in this case (at 17).
Third was the potential injustice and expense to defendants. Effectively, a claimant could bargain with the defendant for the price of being released from the covenant. This would be a higher sum than the actual losses and close to what it costs to run the shop. This would punish the defendant and unjustly enrich the claimant, but the purpose of the remedies for breach of contract is not to do this; it is to compensate (to 15).
There was also the concern of forcing two hostile parties to work together (at 16). Moreover, on the facts, the covenants were too imprecise. For instance, they said nothing of the level of trade required. All the factors were engaged and therefore specific performance was refused.
Held: can’t be awarded SP because of the “constant supervision” objection. Would give rise to an indefinite series of rulings on whether D complies with the order.
Facts: Argyll was the lessee of a supermarket that traded as Safeway. It was situated in a Sheffield shopping centre owned by Co-Operative Insurance Society Ltd (‘CIS’). It was an ‘anchor store’, meaning it would attract shoppers who would then also visit the centre’s other shops. Accordingly, CIS secured a covenant to keep the supermarket open during normal business hours. Some years later, Argyll decided to close the supermarket on the grounds it was unprofitable and gave the landlord only one month’s notice of the closure. After closing the supermarket it stripped out its fittings. CIS sued for specific performance of the covenant on the grounds that damages would be inadequate given the supermarket’s status as an anchor store, and/or damages as a fallback. At first instance, the judge awarded damages but refused specific performance. The Court of Appeal, by a majority, awarded specific performance on the grounds that Argyll had deliberately breached the covenant and ignored a reasonable request to keep the shop open until a new tenant could be found. Argyll appealed to the House of Lords.
Beswick v Beswick [1968] AC 58
specific performance
HoL: said it was specifically enforceable.
Facts: An uncle who ran a coal business agreed to sell the business to his nephew, the agreement was that the purchase price will be paid in installment and after 5 pounds per week to his aunt. The nephew paid during the uncle’s lifetime but stopped paying at his death. She was the administratrix of her husband’s estate, she thought SP of teh agreement. Was that specifically enforceable.
Tesco Stores Ltd v Union of Shop, Distributive and Allied Workers and others [2024] UKSC 28
specific performance
SC holding: grants the employees specific performance.
- Technically this was an injunction but worked as SP in the case
- The court may grant SP if it is an employee seeking SP rather than the employee
- The Claimants hence obtained an injunction to prevent Tesco from removing their contractual entitlement to Retained Pay through fire and rehire.
Facts: Tesco opening distribution centers. In order to retain staff, they offered ppl increased pay. If you agreed to relocate you got more money(this was agreed with the union and the retained pay was stated to be permanent- after 15 years Tesco did not want to keep paying so they tried to end it => they gave notice to the relevant staff – they suggested an upfront payment => if they did not agree they would be fired and then rehired. Employees declined the deal and sued tesco seeking SP of their contract. Tesco argued that there cannot be SP of an employment contract.
American Cyanamid v Ethicon and the ‘Balance of Convenience’
injunctions - interim injunctions
408 ‘If damages in the measure recoverable at common law would be adequate remedy and the defendant would be in a financial position to pay them, no interlocutory injunction should normally be granted, however strong the plaintiff’s claim appeared to be at that stage.’
‘It is where there is doubt as to the adequacy of the respective remedies in damages available to either party or to both, that the question of balance of convenience arises. It would be unwise to attempt even to list all the various matters which may need to be taken into consideration in deciding where the balance lies, let alone to suggest the relative weight to be attached to them. These will vary from case to case.’
damages inadequate for AC if AC wins = bc they would not be able to establish themselves
damages adequate for E if E wins
Lord Diplock at 408:
Facts: IP dispute
- Claimant (AC) alleged Defendant € violated AC’s patent to an “absorbable surgical suture”. If the market was already there, there would be irreparable harm
- Interim prohibitive injunction granted pending teh outcome of the trial.
- The test is the Balance of convenience: as it was in favour of the claimant, the injunction was granted.
Wolverhampton City Council v London Gypsies & Travellers [2023] UKSC 47
inunctions against persons unknown
- These dicta are borne out by the recent developments in the law of injunctions which we have briefly described. They illustrate the continuing ability of equity to innovate both in respect of orders designed to protect and enhance the administration of justice, such as freezing injunctions, Anton Piller orders, Norwich Pharmacal orders and Bankers Trust orders, and also, more significantly for present purposes, in respect of orders designed to protect substantive rights, such as internet blocking orders. That is not to undermine the importance of precedent, or to suggest that established categories of injunction are unimportant. But the developments which have taken place over the past half-century demonstrate the continuing flexibility of equitable powers, and are a reminder that injunctions may be issued in new circumstances when the principles underlying the existing law so require.
- More to the point, the injunction typically operates against a particular newcomer before (if ever) the newcomer becomes a party to the proceedings, as we have explained at paras 129-132 above. An ordinarily law-abiding newcomer, once notified of the existence of the injunction (eg by seeing a copy of the order at the relevant site or by reading it on the internet), may be expected to comply with the injunction rather than act in breach of it. At the point of compliance that person will not be a defendant, if the defendants are defined as persons who behave in the manner restrained. Unless they apply to do so they will never become a defendant. If the person is a Traveller, they will simply pass by the prohibited site rather than camp there. They will not identify themselves to the claimant or to the court by any conspicuous breach, nor trigger the Gammell process by which, under the current orthodoxy, they are deemed then to
become a defendant by self-identification
Held: The Supreme Court unanimously dismisses the appellants’ appeal. It holds that the court has power to grant newcomer injunctions. However, it should only exercise this power in circumstances where there is a compelling need to protect civil rights or to enforce public law that is not adequately met by any other available remedies. In addition, newcomer injunctions should only be made subject to procedural safeguards designed to protect newcomers’ rights. Lord Reed, Lord Briggs and Lord Kitchin give a joint judgment, with which the other members of the Court agree.
This appeal concerns injunctions obtained by local authorities to prevent unauthorised encampments by Gypsies and Travellers. An injunction is a court order that requires the persons to whom it is addressed to do, or refrain from doing, a specified act. In this appeal, the Supreme Court is asked to decide whether the court has the power to grant injunctions against
persons who are unknown and unidentified at the date of the grant of the injunction, and who have not yet performed, or even threatened to perform, the acts which the injunction prohibits.
These persons are known as “newcomers” and the injunctions made against them as “newcomer injunctions”. Between 2015 and 2020, 38 different local authorities, or groups of local authorities, obtained injunctions designed to prevent Gypsies and Travellers from camping on local authority land without permission. The local authorities relied on a range of statutory provisions, including section 187B of the Town and Country Planning Act 1990 which enables the court to grant an injunction to restrain an actual or anticipated breach of planning control. Some of the local authorities also relied on common law causes of action, such as trespass. The injunctions were addressed to “persons unknown” because the Gypsies and Travellers who might wish to camp on a particular site could not generally be identified in advance. At the time the injunctions were granted, these unknown persons, or newcomers, had not yet committed, or threatened to commit, any breach of planning control, trespass or other relevant unlawful activity. The local authorities obtained the injunctions without notifying any other party, at hearings where the interests of Gypsies and Travellers were not represented. Once obtained, copies of the injunctions were displayed in prominent locations on each of the relevant sites
Lawrence v Fen Tigers Ltd [2014] UKSC 13
damages in lieu of an injunction
NB: Lord Sumption went further than Lord Neuberger in his attempts to rein in the mechanistic effects of the Shelfer tests. In a fascinating passage, sure to be revisited by appellate courts in years to come, his Lordship opined: “In my view, the decision in Shelfer is out of date, and it is unfortunate that it has been followed so recently and so slavishly. It was devised for a time in which England was much less crowded, when comparatively few people owned property, when conservation was only beginning to be a public issue, and when there was no general system of statutory development control. The whole jurisprudence in this area will one day need to be reviewed in this court. There is much to be said for the view that damages are ordinarily an adequate remedy for nuisance and that an injunction should not normally be granted in a case where it is likely that conflicting interests are engaged other than the parties: interests. In particular, it may well be that an injunction should as a matter of principle not be granted in a case where a use of land to which objection is taken requires and has received planning permission.”
Held:
Consequently, the appeal is allowed and the injunction granted by the judge restored [133]-[153]. However, when and if the matter goes back before the judge, he should be entitled to consider whether to discharge the injunction and award damages instead. ⇒ principle: The court has an unfettered discretion to grant damages in lieu of injunctive relief and
should adopt a more flexible approach. The principles of Shelfer v City of London Electric Lighting Co [1895] 1 Ch 287 should not be applied mechanistically.
Lord Neuberger also took the opportunity to discuss the relevance of public interestL in deciding whether to grant an injunction or damages in lieu. He observed:
“I find it hard to see how there could be any circumstances in which [public interest] arose and could not, as a matter of law, be a relevant factor.”
Facts: The claimants complained about noise from speedway and stock car racing at a stadium and track on agricultural land near Mildenhall in Suffolk. The stadium had been constructed pursuant to a 1975 grant of planning permission in respect of speedway racing; in 1997 the planning authority issued a Certificate of Lawfulness of Existing Use or Development, confirming that stock car racing had taken place at the stadium for the previous ten years. The track was used for motorcross events pursuant to a series of temporary permissions from 1992 and then pursuant to a permanent grant of planning permission in 2002; each of the grants imposed conditions limiting the frequency of events on the track and the amount of sound which could be emitted. A bungalow called KFenlandL, built in the 1950s, stood 560 metres from the stadium and 86- metres from the track. In 2006 the claimants purchased and moved into Fenland. In 2008 the claimants issued High Court proceedings against the owners and operators of the stadium and track, contending that the activities at the stadium and track constituted a nuisance, and seeking an injunction to restrain them. The claimants succeeded in the High Court, lost in the Court of Appeal but won in the Supreme Court, which reinstated the injunction awarded by the trial judge.
Pitt v Holt; Futter v Futter [2013] UKSC 26, Lord Walker:
recission on ground of mistake
[109] ‘A misprediction relates to some possible future event, whereas a legally significant mistake normally relates to some past or present matter of fact or law.’
[126] ‘The gravity of the mistake must be assessed by a close examination of the facts, whether or not they are tested by cross-examination, including the circumstances of the mistake and its consequences for the person who made the vitiated disposition…(-sufficiently grave so that it would be unjust not to resolve it)
The injustice (or unfairness or unconscionableness) of leaving a mistaken disposition uncorrected must be evaluated objectively, but with an intense focus… on the facts of the particular case.’
[128] ‘The court cannot decide the issue of what is unconscionable by an elaborate set of rules. It must consider in the round the existence of a distinct mistake (as compared with total ignorance or disappointed expectations), its degree of centrality to the transaction in question and the seriousness of its consequences, and make an evaluative judgment whether it would be unconscionable, or unjust, to leave the mistake uncorrected. The court may and must form a judgment about the justice of the case.’ = stresses the central discretion of the court
[135] ‘In some cases of artificial tax avoidance the court might think it right to refuse relief, either on the ground that such claimants, acting on supposedly expert advice, must be taken to have accepted the risk that the scheme would prove ineffective, or on the ground that discretionary relief should be refused on grounds of public policy.’
NB: Note that tax avoidance is not in itself illegal.
[142] [But t]here would have been nothing artificial or abusive about Mrs Pitt establishing the [Trust] so as to obtain protection under section 89 of the Inheritance Tax Act 1984.’
The Supreme Court rejected this compartmentalisation and the distinction between effect and consequences in favour of a singular test: only if the mistake is sufficiently grave shall the disposition be voidable (at [122]–[123]). In effect Lloyd LJ’s three-limb test was rolled up and the rigid distinction between different types of mistake rejected, although where the mistake is to effect, it is likely to be graver. On the facts of Pitt v Holt, the mistake was of sufficient gravity to justify avoiding the transaction.
Facts: Mrs Pitt took advice about the tax consequences of a particular arrangement, which turned out to be incorrect and exposed her to a large liability. She sought to have the transaction set aside. The court reconsidered the law on the equitable jurisdiction to set aside a transaction on the basis of mistake.
Old cases had suggested that jurisdiction depended upon whether the mistake was as to the legal ‘effect’ (what transaction were you of the transaction or its ‘consequences’: Gibbon v Mitchell – recission was only available in case of mistake on effect.
Lindsay Petroleum Co v Hurd (1873-74) L.R. 5 P.C. 221,
recision - latches
‘… the doctrine of laches in Courts of Equity is not an arbitrary or a technical doctrine. Where it would be practically unjust to give a remedy, either because the party has, by his conduct, done that which might fairly be regarded as equivalent to a waiver of it, or where by his conduct and neglect he has, though perhaps not waiving that remedy, yet put the other party in a situation in which it would not be reasonable to place him if the remedy were afterwards to be asserted, in either of these cases, lapse of time and delay are most material. But in every case, if an argument against relief, which otherwise would be just, is founded upon mere delay, that delay of course not amounting to a bar by any statute of limitations, the validity of that defence must be tried upon principles substantially equitable. Two circumstances, always important in such cases, are, the length of the delay and the nature of the acts done during the interval, which might affect either party and cause a balance of justice or injustice in taking the one course or the other, so far as relates to the remedy.’ = it is not simply the passage of time (+ separate to the limitation by statue, teh latches bar may still applied if you have delayed exercising your right at the court’s discretion)
FSHC Group Holdings Ltd v Glas Trust Corporation Ltd [2019] EWCA Civ 1361
rectification
[146] ‘a party will not be allowed to enforce the terms of a written contract, objectively ascertained, when to do so is against conscience because it is inconsistent with what both parties in fact intended (and mutually understood each other to intend) those terms to be when the document was executed. This basis for rectification is entirely concerned with the parties’ subjective states of mind.’
(17h42) = if the written document does not reflect what we intentded it would be unconscionable to allow it to stand.
[176] ‘before a written contract may be rectified on the basis of a common mistake, it is necessary to show either (1) that the document fails to give effect to a prior concluded contract or (2) that, when they executed the document, the parties had a common intention in respect of a particular matter which, by mistake, the document did not accurately record.’
The Court of Appeal held in favour of the claimant. The parties had a common, continuing intention that the deeds would only grant the claimant the missing security. The deeds did more than this due to a mistake. As such, rectification was available.
Factd: The parties had an agreement whereby the claimant agreed to provide security for the defendant’s clients. The claimant later learned that it had not been assigned an interest in a shareholder loan, which the agreement required. To fix this problem, the parties executed two more deeds. Although the parties intended these deeds solely to grant the claimant the missing interest, their wording imposed extra obligations on the claimant. The claimant sought rectification due to the parties’ common mistake, to remove these obligations from the deeds.
Porter & Anor v Stokes (Trinidad and Tobago) [2023] UKPC 11
rectification
[43] The ‘distinction between the basis of a rectification claim where there is, or is not, a prior binding contract is well-founded in basic principle. Where there is a prior binding contract, the nature of the claimant’s equity is to have their contractual right vindicated by bringing the later implementing document into accordance with the terms of the contract. By contrast, the nature of the equity in a case where there is no prior binding contractual right is to remedy the unconscionability of the enforcement of a binding document which runs counter to the outwardly manifested common intention of the parties making it.’
[43] ‘there is the clear express reservation of a right of way over the strip to the vendor… that reservation is inexplicable if the strip was not to be conveyed to the Porters. Then there is the parallel failure to grant to the Porters any right of way over the strip as the means of access to the main parcel, if the strip was not to be conveyed to them. No remotely competent conveyancer would fail to do that….’
Held: rectification was granted here.
Facts: Claim for rectification of deed of conveyance of a land. Parcel of land conveyed to Cs by D, but plot was landlocked by D’s land. Strip of land with access to main road not included in the conveyance, nor any right of way granted. Deed did expressly reserve a right of way for D over the Strip. There were a prior Contract for sale between the parties which did include the Strip. Both Cs and D (/D’s successors) used the strip for 24 years.
National Union of Rail, Maritime and Transport Workers & Anor v Tyne and Wear Passenger Transport Executive (t/a Nexus) [2024] UKSC 37
rectification
Which contracts need to be rectified?
[36] – [45] The Court of Appeal considered that, in seeking to have the letter agreement (which is not legally enforceable) rectified, Nexus is aiming at the wrong target. It should instead be seeking rectification of the individual contracts of employment with its employees which incorporate the terms of the letter agreement. The Supreme Court disagrees. There is no scope for arguing that the documents recording the contracts of employment do not accurately record what Nexus and its employees intended them to say and should therefore be rectified. The contracts of employment have exactly the effect which they were intended to have of incorporating the terms of any relevant collective agreement between Nexus and the Unions. If any mistake was made, it was made by Nexus and the Unions in failing accurately to record the terms of their collective agreement. It is therefore the letter recording that agreement which needs to be rectified. The result of incorporating the terms of the letter agreement into the individual contracts of employment is that, if the wording of the letter is rectified, the terms of those contracts will change.
Is the letter agreement rectifiable?
[46] – [54] The Court of Appeal considered that the fact that a collective agreement is legally unenforceable is a barrier to its rectification. Again, the Supreme Court disagrees. The reason why a court will not normally rectify a document recording a legally unenforceable agreement is that it would be futile to do so because rectifying the document will not affect any legal rights or obligations. However, although the letter agreement is not itself legally enforceable, rectifying it would alter legal rights and obligations: not between the parties to it but indirectly. between the employer and employees into whose contracts the terms of the letter agreement are incorporated. There is no reason in principle why, if a mistake has been made in recording
the letter agreement, it cannot be rectified.
Who are the proper defendants? [55] – [68]
The Supreme Court nevertheless agrees with the Court of Appeal that Nexus has brought its claim for rectification of the letter agreement against the wrong defendants. Proceeding against the Unions and not the employees is improper for two reasons. First, there is no legal dispute between Nexus and the Unions as to the existence or extent of any legal right between them.
Second, Nexus is asking the court to make an order which would alter the legal rights of employees without giving them the opportunity to be heard. That is contrary to the most basic principle of procedural justice.
The Supreme Court does not accept that there is any significant practical barrier to bringing a claim for rectification of the letter agreement against employees whose legal rights are affected by the claim. Even if there were, it could not justify departing from the basic legal principle that the proper parties to proceedings are those whose legal rights will be affected by the court’s
decision. In these circumstances the Court of Appeal was right to dismiss the action, leaving Nexus to bring a fresh action against the employees if it chooses
Held: the appeal of Nexus was dismissed by the SC. One of the question – whether the collective agreement would be rectified because it was included in the employee’s contract so has a legal effect) but thy had the wrong defendants.
Facts: Tyne and Wear Passenger Transport Executive, known as “Nexus”, operates the Tyne and Wear Metro. Nexus brought a claim against two independent trade unions recognised as entitled to conduct collective bargaining on behalf of its employees. The unions are the National Union of Rail, Maritime and Transport Workers and Unite the Union (“the Unions”). Collective agreements negotiated between Nexus and the Unions are not intended to be legally enforceable, but the employment contracts between Nexus and its employees contain a clause which incorporates the terms of such collective agreements as terms of service. In 2012 a collective agreement was reached between the Unions and Nexus and recorded in a letter stating that Nexus would consolidate a pre-existing entitlement referred to as a “productivity bonus” into the basic pay of the employees, giving them a higher basic salary. A dispute arose about the meaning of this letter agreement and in 2015 a group of employees brought a claim against Nexus in the employment tribunal (“the Anderson proceedings”). Mr Anderson and the other claimants argued that they had been underpaid because, on a proper interpretation of the letter agreement, the effect of consolidating the “productivity bonus” into basic pay was to increase shift allowances which are calculated by reference to basic pay. Nexus denied that this was the correct interpretation of the letter agreement.
Marley v Rawlings [2014] UKSC 2
rectification - wills
Reasoning:
Interpretation
Whether a particular approach is one of interpretation or rectification is an important, and sometimes difficult and controversial, issue, but only limited argument was directed to this point on this appeal. As the court considers that this appeal succeeds on the ground of rectification, it proceeds on the basis that it fails on interpretation [41].
Deletions
The court rejects the contention that the Will can be treated as a valid will by reference to the principle that it can, in some circumstances, make deletions to a will. It is inappropriate to invoke this principle to justify selecting phrases and provisions for deletion from a will, intended to be signed by someone else, to enable the will to comply with the testator’s intentions [47].
Rectification
It is unchallengeable that Mr Rawlings signed the Will and that he did so with the intention of it being his last will and testament. The Will is unambiguously intended to be a formal will and was signed by Mr Rawlings, in the presence of two witnesses, on the basis that it was indeed his will [57]. It is clear from the provisions of Section 9 that the fact that a will may face problems in terms of interpretation or even validity does not mean that it cannot satisfy the formality requirements [58]. As it was Mr Rawlings who signed the Will, it can only have been his will, and it is he who is claimed in these proceedings to be the testator for the purposes of Section 9. There can also be no doubt from the face of the Will (as well as from the evidence) that it was Mr Rawlings’s intention at the time he signed the Will that it should have effect as his will; consequently Section 9 is satisfied [59].
A document does not have to satisfy the formal requirements of Section 9 before it can be treated as a “will” capable of being rectified pursuant to Section 20 [60]. It is enough that it was intended to be a will. The expression ‘clerical error’ in Section 20 carries the relatively wide meaning of a mistake arising out of office work of a relatively routine nature, such a preparing, filing, sending, or organising the execution of, a document, rather than the relatively narrow meaning of a failure in transcription [76].
Consequently, the Will falls within, and can be rectified under, Section 20 [86].
Held:
The court unanimously allows the appeal. Lord Neuberger, with whom the rest of the court agrees, gives the majority judgment. The court holds that the Will should be rectified so that it contains the typed parts of the will signed by the late Mrs Rawlings in place of the typed parts of the will signed by Mr Rawlings.
Facts:
On 17 May 1999, Alfred Rawlings and his wife, Maureen Rawlings, were visited by their solicitor to enable them to execute wills. The wills were short and, except for the differences required to reflect the maker, they were in identical terms. Each spouse left his or her entire estate to the other, but, if the other had already died, the entire estate was left to the appellant, Terry Marley. By an oversight, the solicitor gave each spouse the other’s draft will, and Mr Rawlings signed the will meant for Mrs Rawlings, and Mrs Rawlings signed the will meant for Mr Rawlings.
Mrs Rawlings died in 2003, and her estate passed to her husband without anyone noticing the mistake. However, when Mr Rawlings died in August 2006, the error came to light.
Bhaur v Equity First Trustees (Nevis) Ltd [2023] EWCA Civ 534
recission - mistake
The Court noted (at para 56) the general requirements of a claim in mistake as set out in Pitt v Holt [2013] 2 AC 108, namely 1) a mistake which is 2) of the relevant type and 3) sufficiently serious so as to render it unjust or unconscionable on the part of the donee (here, Safe Investments UK) to retain the property given to them.
The Court of Appeal considered that whilst misprediction could still be a bar to relief for rescission for mistake, it did not need to deal with that fine distinction since the primary question in this case was in the third limb of the test, which had been adapted from Ogilvie v Littleboy (1897) 13 TLR 399 and involved determining whether “it would be unconscionable or unjust for a donee to be permitted to retain the benefit of a gratuitous disposition by a person who has deliberately run the risk that the scheme of which the disposition forms part might not work” (paragraph 85). The court needed to form a view as to the merits of the case generally when assessing that unconscionability. The Court also noted the comments in Pitt v Holt. as to the possibility of relief being denied in cases of “artificial tax avoidance”, either on the grounds of misprediction or general public policy.
The Court considered that even if the Bhaurs were operating under a mistake rather than a misprediction (so that the first and second limbs of the Pitt v Holt test were fulfilled) and were innocent of any tax evasion, the appeal still had to fail:
Whilst the consequences of refusal would be significant (the IHT bill could be larger than the estate) the Bhaurs had chosen to implement what they knew was a tax avoidance scheme and which they knew carried a risk of failure. They had therefore deliberately run the risk; even if it was not characterised as a misprediction (para 101).
It was “of considerable weight” that the scheme in question was “entirely artificial”. There was no intention to generally benefit “employees”, or anyone outside the Bhaur family as was the normal intention with an EBT (paras 102 and 103).
The tax avoidance was not unlawful, but a “social evil” which was a very weighty factor against relief (para 105).
In Bhaur, the tax avoidance scheme was an employee benefit trust. Mr and Mrs Bhaur had a substantial property business which was transferred to a UK company (Safe Investments UK) as part of the scheme. Safe Investments UK then transferred the property business to a BVI trust company, to be held for the benefit of the employees of Safe Investments UK, or any spouse, child or dependent of such, although any persons who were “participators” or connected with them could not benefit (this would, at the time, have included Mr and Mrs Bhaur) other than receipt of income.
The scheme sought to take advantage of a perceived loophole, that those connected to participators could benefit after the death of that participator, so the Bhaur children would then avoid the need to pay inheritance tax. The assets were then transferred several further times, albeit it not to any material effect for the claim in mistake. Ultimately, after challenge by HMRC, the trustee then took steps to collapse the trust entirely, and appointed the income out to Mr and Mrs Bhuar and their children, and then appointed the capital out to the NSPCC; no doubt to the surprise of the Bhaurs.
Jaggard v Sawyer
damages in lieu of an injunction
The Court of Appeal upheld the judge’s decision to award damages instead of an injunction. On the question of damages, it also upheld the judge’s decision. The Court of Appeal agreed with the judge that the value of the right should be what a reasonable seller would sell it for. It held that in situations like this a plaintiff should not be treated as eager to sell but, on the other hand, that the court would not value the right at the ransom price which a very reluctant plaintiff might put on it.
An exposition of the law and cases dealing with when it is appropriate to award damages in lieu of an injunction from Shelfer onwards, and the leading modern authority on this issue, confirming the 4 part test set out in Shelfer as being the basic working rule.
In breach of covenant, the defendants built a property on a residential development in a private cul-de-sac. The plaintiff, who owned another house in the development, began proceedings when the building was at an advanced stage and did not seek an interim injunction. The judge refused to award her a final injunction and awarded damages instead. He made an award of damages based on the sum the defendants might reasonably have paid for a right of way to the new house and the release of the covenant. He awarded the plaintiff, as one of the nine owners of houses in the cul-de-sac, a ninth share of this amount. The plaintiff appealed.
Kelly v Brennan [2020]
will - rectification
The Court granted rectification of the Will in the terms sought, as this was an obvious clerical error and that the Will did not reflect the deceased’s testamentary intentions
In this case, the deceased wished to divide the residue of his estate into six equal shares and divide those between 5 named beneficiaries and the last one-sixth was to be divided equally between the deceased’s late sister’s five children. His testamentary intentions were clear. Unfortunately there was a clerical error when the will was typed up. It should have recorded that the residue was to be divided into six equal shares and then identify the beneficiaries to whom those shares were to be divided. Instead the will simply listed all 10 of the beneficiaries and then added “in equal shares absolutely”.
Wright v National Westminster Bank Plc [2014] EWHC 3158 (Ch),
to think about the application of pitt v holt
the High Court reviewed the guidance from the Supreme Court in deciding whether it was able to exercise discretion to rescind a disposition on the basis of a unilateral mistake. The High Court said that such a mistake cannot be a pure question of fact nor can it have arisen out of inadvertence or ignorance. The causative mistake must be so grave that it would be unconscionable for the court to refuse relief.
