What does it mean for a payment to be ‘subject to completion’? Judge rules in favour of law firm after client refused to pay legal fees!

Written by Paul Cheuk

The High Court of Justice has recently handed down an instructional judgment (Blacklion Law LLP v Amira Nature Foods Ltd [2022] EWHC 1500 (Ch)) in a lawsuit between a law firm and its client. The case involved a small London-based law firm suing a multinational rice distributor and its owner-director over unpaid legal fees.

The dispute concerns the interpretation of some ambiguous terms in the retainer, written by the law firm itself. The client asserted that with the terms ‘subject to completion’, there was a no-success-no-fee arrangement and refused to pay the legal fee. The judge found otherwise despite that wording. This ruling would be readily applicable to any other disputes between a law firm and its client, as well as contractual disputes in a commercial setting.

Keep reading to learn more about this commercial law case.

Background

The law firm involved was relatively small, but its proprietor Y was an experienced lawyer in handling legal issues relating to commercial law. Y’s firm had been providing a range of services to the company under a general retainer and its terms of business.

The client in the case was a company with an international business selling rice and rice-related products. It was listed on the New York Stock Exchange at that time (but subsequently delisted for failing to file financial reports). Its owner KC owned 60% of its shareholding and he maintained tight control on the company’s day to day operation, including its service bill payment.

In 2017, the company’s financial status came into trouble, and it was in need of fresh funds. After consulting with a financial professional arranged by Y, the company sought to raise funds by issuing corporate bonds. KC invited Y’s firm to be the organizing party of the project in communicating to banks and other law firms.

For this bond project, a time-based fee structure with a monthly minimum of £250,000 was initially agreed between the law firm and the client. KC requested to have the bill paid by an assignment of shares of the company at an equivalent market value, to which Y agreed.

This special arrangement however was not put into a written retainer, which did not occur until May and only after further negotiations and amendments. Nonetheless, Y immediately began the work from January, and several high-level meetings with banks and multiple law firms were held. Y worked tirelessly and diligently, and by the end of April 2017, more than 90% of all work had been done, and up to 643 chargeable hours were lodged.

Meanwhile, the accrued legal cost had amounted to around US$384,570, which was equivalent to £300,000 at the time. It was especially worrying to the firm at that point when it seemed that the bond project may not be successful after all.

The Case

By early March 2017, Y began to be concerned about the lack of a retainer that was signed by the client. The law firm therefore drafted a retainer for the bond project and asked for it to be signed by KC and the company. Sensing that their financial situation may not improve, KC and the company also hesitated to agree to the legal cost already incurred. After some back and forth negotiation, Y drafted a retainer with a fixed-fee arrangement at a lowered fee of £300,000.

In the final form of the retainer prepared by Y’s firm was signed at last on 3 May 2017. Among other alterations from the general retainer, it stated that “the Firm will charge the Company a fixed fee of £300,000 for the service in connection with this Matter, subject to the completion of the Matter by 31 May 2017.” It is this last line that created all the ambiguity and became the focal point of the judgment as there was ambiguity surrounding what is it that was being ‘subjected to’.

The company did not pay for the bill after the project fell through. In the ensuing trial, the company argued that the agreement between the parties was a conditional fee arrangement because it said it was “subject to the completion by 31 May 2017”. The company argued that the clause was there to condition whether a payment would be charged, and the legal fee was payable only if the project was completed in time. Evidently the project failed, and on the face of special retainer no payment should be liable. The company also submitted that as the clause was drafted by the law firm, and that the parties are commercially sophisticated, the wordings should be taken at face value.

The law firm, on the other hand, argued that the condition at that second part of the sentence did not operate on whether a payment would be charged at all, but only to determine whether the payment is to be one of fixed fee or not. The law firm submitted that the statement on the retainer should be taken to mean that if the project can be completed by 31 May 2017, then the law firm would only charge a fixed sum, but if the project was not completed, then the fixed fee would not be applicable. Presumably it would be reverted to the time-based calculation under the general retainer.

The Ruling

The judge at last ruled in favour of the law firm and ordered the company to pay for the legal fees. The judge sought to give a proper construction on the clause in the retainer. The law on construction is that the court will ask itself what a reasonable person, having all the background knowledge, which would have been available to the parties, would have understood the words used in the contract to mean. On top of the natural and ordinary meaning of the words, the court will look at the purpose of the contract term as well as considering business common sense.

In the judgment, the judge did find the language used to be unclear and ambiguous. The judge however refused to take the wordings at their face value, and also rejected the proposition that weight should be given to the fact that both parties were commercially sophisticated. On the contrary, the judge said that while the parties sophisticated, it does not mean that the language they use cannot be ambiguous, and the more complicated agreement, the harder it may be precisely expressed in writing.

Following fact finding, the judge found that the date of 31 May 2017 did not have any particular commercial significance for the company – it had already passed a near-term financial milestone date for the company anyway. The judge also relied on testimonies of several witnesses and found that while it is possible to have a minimum sum, fixed sum or contingent success fee on top, it was not the practice for lawyer working in bond issue to be remunerated wholly on conditional fee.

Furthermore, the judge noted that the fixed fee in the retainer was a discount from the general retainer that was based on time, and that the fixed fee of £300,000 was also cheaper than the billable time already spent. The judge concluded that it would not make business common sense for Y to tie up such a huge proportion of its human resources on a project, and that it would also not be reasonable for the firm to suggest a contingent fee in early May 2017, only to bet on the project being completed by the end of the same month, or else to receive no compensation at all. The court therefore arrived at an interpretation of the ambiguous terms based on reasonable business common sense, ruling that on a proper construction of the clause it was a condition on fixed fee, and not a contingency arrangement.

The court went on to discuss an alternative doctrine to resolve the issue based on rectification, meaning to correct a mistaken record of agreed terms. The requirement for rectification is that the parties:

1) must have a common intention in respect of an agreement,

2) have outward expression of the intent,

3) that intent continued at the time of signing

4) by mistake the agreement did not reflect that common intent.

The court considered all the correspondence between the parties up to the signing of the retainer as well as the testimony by the parties at trial. The judge ruled that the parties’ common intention was a fixed fee, not a contingency fee, and that common intention had continued from April until the execution of the retainer. The outward expression was satisfied through previous emails from the company’s agent asking for a ‘flat fee’, and from the law firm’s email replies.

The court also decided on a supplemental matter concerning standard Terms of Business. This concern the interest payable on unpaid fee. The law firm sought an interest rate of 1.5% per month that was specified under the Terms of Business. However, the Terms of Business was only referred to by the general retainer, and not by the bond project retainer. On this point, the court ruled that as those terms made clear that it would apply to all business done by the firm, then unless it was later expressly or necessarily implied excluded in later agreement, the Terms would still be applicable.

Our thoughts

This case revealed several important matters in contract interpretation. Firstly, in suitable circumstances a court would not interpret an ambiguous contract term merely on its literal meaning. This is especially so in a commercial setting, which includes a retainer between a law firm and its client, where the court can put emphasis on whether the term follows business common sense. This is even the case when the parties are sophisticated businesses, and not least a contractual term written by the law firm itself.

Secondly, a court can elect to rectify a mistakenly or ambiguously written contract if it can find continuing common intentions between the parties up to the signing of the contract. This is highly fact sensitive, and a court can consider all previous correspondence between the parties.

As such, the keeping of evidence trail including the entire process of pre-contractual negotiation is highly important.

Lastly, although at the very end of the lawsuit the court did side with the party who had been owed a great sum of money after their service, this was not until 4 years after the event and after lengthy applications and trials. It goes to show the importance of accurately and clearly drafted contract terms, and that real future litigation risk exists if some key terms are left ambiguous.

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Investigation launched into ASOS, Boohoo and Asda over ‘greenwashing’ claims

The Competition and Markets Authority (CMA) has launched an investigation into three fashion brands over their ‘green’ claims. The three fashion brands being investigated by the CMA for greenwashing include the supermarket Asda, as well as the online fashion brands, ASOS and Boohoo.

The CMA will look at the extent to which green claims made by each of the companies can be classed as ‘misleading’. If their green claims are found to have been misleading then the CMA have made it clear that they won’t hesitate to take action, including through the courts if necessary.

Keep reading the article to learn more about greenwashing, and the reasons for the investigation against these companies.

Greenwashing in the fashion industry

Greenwashing is used by companies across various sectors as a way of presenting themselves as being environmentally friendly, often by companies which have a negative impact on the environment in general.

Greenwashing may mislead the consumer into thinking they are making an ethical choice by deciding to purchase or use the services of that company. The UK Advertising Standards Authority has for instance previously taken action against Suzuki, SEAT, Toyota and Lexus for making false claims about their vehicles in the past.

The CMA has recently decided to place an increased focus on greenwashing, having published its Green Claims Code in September 2021. According to the government, it aims to “help businesses understand how to communicate their green credentials, while avoiding the risk of misleading consumers”.

The fashion industry is often particularly guilty of greenwashing and is one of the industries with the greatest polluters on the planet, responsible for up to 10% of global carbon dioxide output according to Bloomberg. It is also claimed that it contributes to emissions than both the aeronautical industries and the shipping industries combined. This is perhaps why the investigations into these companies is part of an increased focus on the green activities of the fashion sector by the CMA.

What are they being investigated for?

The issue appears to be around some of the branding by each of their companies, which they have used to add weight to their eco-friendly credentials. It is claimed that some of the slogans used including ASOS’s “Responsible edit”, Boohoo’s ‘Ready for the future’ and ‘George for Good’ by ASDA, may give the impression that their products are more sustainable than they actually are. All of the companies have committed to cooperating with the CMA in their investigation.

Explaining the reason for the investigation, Sarah Cardell, interim Chief Executive of the CMA, said:

“People who want to ‘buy green’ should be able to do so confident that they aren’t being misled. Eco-friendly and sustainable products can play a role in tackling climate change, but only if they are genuine.” Cardell went on to warn that: “all fashion companies should take note: look at your own practices and make sure they are in line with the law”.

Boohoo and ASOS, along with other brands like Shein, are often cited as examples of online clothes companies which are guilty of contributing towards the fast-fashion epidemic. People tend to buy more clothes than they used to, with fast fashion production having doubled since the year 2000. In a sign of how unfashionable the fast-fashion industry is becoming, the programme Love Island, hugely popular among Generation Z, this year turned its back on fast fashion by choosing to dress its contestants in pre-worn clothes from eBay.

Industry experts have questioned the long-term future of online fast-fashion brands, and this investigation by the CMA will certainly not help to detoxify their reputation.

Our thoughts

It seems only right that companies which seek to mislead consumers into thinking they are making an ethical decision by purchasing or using the services of the company are punished as a result. While Asda is a slightly different situation, the primary consumers of companies like BooHoo and ASOS are likely to be younger compared to many other fashion brands. Research shows that young people tend to be more environmentally conscious than older people, and are therefore more likely swayed into purchasing from a company which purports to care about its environmental impact.

Greenwashing is likely to continue to become more of an issue as the climate emergency becomes more tangible in the lives of everyday people. Furthermore, the commitment by the UK of decarbonising all industries and reaching net zero carbon emissions by 2050 will also put further pressure on fashion to commit to curbing their environmentally unfriendly practises.

It is worth keeping an eye on how the investigation by the CMA proceeds, and the extent of the action taken, if any. If the investigation concludes that action should be taken against the three named companies, the consequences could have serious ramifications for other fast fashion companies.

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Court rules that social worker’s assessment that teenage asylum seeker is an adult was false

A person who has entered the United Kingdom to claim asylum is treated differently depending on whether they are an adult or a minor. A minor’s claim is treated more delicately by the Home Office with respect to the asylum process, decision making, and support provided by a Local Authority.

Below, we look at a case where an asylum seeker’s age was disputed by a Local Authority, with the social worker involved concluding that the asylum seeker was an adult instead of a child.

R (on the application of HAM) v Brent London Borough Council

The Claimant was a Sudanese national who entered the UK in May 2021. On arrival he made a claim for asylum and claimed to be aged 17 and therefore should be treated as a child. The local authority did not believe the Claimant and therefore treated the Claimant’s claim as an adult.

A month later, a social worker undertook an age assessment on the Claimant and concluded that the claimant was 23 years old.

The Claimant instructed legal representatives who wrote a pre-action letter to the local authority criticising how the age assessment had been conducted and provided evidence from a charity organisation who confirmed that they believe that the Claimant’s age is 17. The Local Authority maintained their decision and the Claimant’s legal representatives filed a claim for Judicial Review.

Judicial Review Proceedings

The Claimant contented that the local authority had undertaken the age assessment unfairly. The Claimant raised the following points in relation to fairness of the assessment:

the interpreter should have been present in person, not by phone.
the assessors had not conducted the interviews with an open mind.
the interview was conducted without an appropriate adult.

The following arguments were raised in relation to the local authority reaching the wrong conclusion:

the assessors placed too much reliance on their opinion of the claimant’s appearance and demeanour and not enough weight was given to aspects of the claimant’s appearance that suggested he was a child.
the assessors incorrectly concluded that the claimant was ‘reticent’ as part of an attempt to avoid saying anything that might hinder his application.
the assessors had failed to realise that if the claimant was reticent that reticence could be because he did not wish to say anything that might prejudice his asylum claim, and not because of any matter relevant to the age assessment.
there was no ‘minded to’ process, the claimant was not given the opportunity to meet the assessors’ concerns about his credibility; and
the assessors had not recognised the need to give the claimant the benefit of the doubt on unclear matters or recognise ‘a margin of error’.

The judgement

The Administrative Court considered the case, stating that a fair interview would permit the person who was being assessed a genuine opportunity to explain his position to answer questions that might be put to him and to respond to matters adverse to his case.

The Court held that the Local Authority came to their conclusion as they had concerns with the Claimant’s credibility, and therefore these concerns should have been put forward to the Claimant. Accordingly, the Court held that the Claimant’s claim succeeds on the basis that he was not given the opportunity to meet the assessors’ concerns about his credibility.

The Court made a declaration that the age assessment was unlawful, however a substantive decision in relation to the Claimant’s age would be transferred to the Upper Tribunal to decide.

Our comments

The above case shows the importance of seeking legal representation and challenging decisions made by the Local Authority when an incorrect decision is made. Age assessments are done in person and are subject to human error. Should the Claimant in the above case have not contested the Local Authority’s decision, then it would have had a significant impact on the support he receives and on his asylum claim.

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Supreme Court says part-year workers entitled to proportionally same holiday pay as full-time workers

A new ruling (Harpur Trust v Brazel) by the Supreme Court has favoured part-year workers and casual workers, opening the door to thousands of claims for compensation. The ruling says that these workers are entitled proportionally to the same holiday pay as full-time workers. It also found that the methods of calculating pro-rated annual leave for part-time workers ran contrary to the Working Time Regulations 1998.

The Supreme Court upheld a decision made by the Court of Appeal that a music teacher on a zero hours contract, Lesley Brazel, should receive an average week’s pay for each week of statutory leave from her employer, Harpur Trust.

Previously, employers would generally prorate holiday pay at 12.07% of wages for the hours worked. As a result of dismissing Harpur Trust’s claim to use the 12.07% standard, this opens the door for potentially hundreds of workers to claim for historical underpayment. However, it is unlikely to result in a change in the law. Nevertheless, from now on businesses should calculate holiday pay for part-time workers based on average earnings over 52 weeks, rather than by the hours they have worked.

Keep reading to learn more about the case.

What is a part year worker and what industries will this ruling affect?

Part-year workers are workers who, perhaps unsurprisingly, only work part of the year. They are often seasonal or temporary workers. There is no specified number of hours that a part year worker works per week, and this can vary depending on their role.

This decision will have a profound impact on businesses who employ workers on zero hours, term-time or on a seasonal basis. This primarily affects industries such as education, care and the healthcare sector. These industries often employ a proportionally higher number of temporary workers.

Harpur Trust v Brazel

Lesley Brazel is a music teacher who works at a school run by the Appellant, Harpur Trust. Ms Brazel works part time and is only paid for the hours she teaches during term time, working a variable number of hours per week. According to Brazel, this resulted in her receiving less holiday pay than she did before.

Through the Working Time Directive, the majority of UK workers are provided with four weeks per year. They are also granted 1.6 weeks through the Working Time Regulations 1998, totalling 5.6 weeks overall. The latter is granted through the UK’s implementation of the EU legislation, which defines a week’s pay as an employee’s average pay over 12 weeks before a period of leave.

In 2011, the Trust changed the way that it calculated her holiday pay in with the Acas guidance of the time. Before 2011, they would calculate Brazel’s pay for the 5.6 weeks by calculating her average week’s pay in accordance with the Employment Rights Act 1996 and multiplying it by 5.6. After 2011, they amended this by multiplying the hours Brazel worked by 12.07% and then multiplied this by the hourly rate of pay, in line with the government guidance.

Brazel subsequently brought a claim before the Employment Tribunal for underpayment of holiday pay through unlawful deductions of her wages. While the Employment Tribunal dismissed her claim, the Employment Appeal Tribunal allowed her appeal and held that the statutory regime required the use of the calendar week method. The Court of Appeal dismissed the appeal made by the Harpur Trust, as did the Supreme Court.

The Supreme Court’s judgement

The Supreme Court rejected the arguments made by the Trust in a unanimous verdict. They found that the model left employees with irregular part-time hours out of pocket.

The Harpur Trust accepted that Brazel is a worker, meaning that she is entitled to 5.6 weeks of paid annual leave, which she takes during the school holidays. However, because she isn’t required to work at all during the school holidays, there are more than 5.6 weeks each year where she doesn’t work at all.

Harpur Trust suggested two alternative methods of calculating holiday pay, making the argument that while Brazel would be better off under the Calendar Week Method proposed by the Supreme Court, other hypothetical workers would be worse off compared with Harpur Trust’s suggested methods.

The Supreme Court rejected this, putting forward three main points of contention with the proposed methods proposed by the Harpur Trust:

The proposed methods are contrary to the Working Time Regulations, which determined that holiday pay should be calculated in accordance with a 12-week period which ignores the weeks in which the worker hasn’t received pay.
The two methods would require employers and workers to keep detailed records of every hour worked, even if the worker wasn’t paid at an hourly rate. These complicated calculations were seen as problematic as a result.
The Supreme Court rejected the idea put forward by Harpur Trust that the Calendar Week Method of calculating holiday pay is not appropriate. They decided that a worker in Brazel’s situation receiving holiday pay which represented a slightly higher proportion of their annual pay didn’t justify the Harpur Trust’s alternative method of revising the statutory scheme.

The judgement confirms the entitlement to 5.6 weeks holiday for full and part-time workers, without pro-rating.

Our thoughts

Following this outcome, employers should immediately look to rectify annual leave entitlements for part-year workers by moving from the 12.07% calculation method to the 5.6 weeks pay method. This calculates holiday pay by multiplying the average week’s pay for the part-year worker by 5.6.

It is important to clarify that 5.6 weeks does not necessarily equate to 28 days holiday, which is the amount a worker working five days a week would receive. For example, a part time worker who works three days a week is entitled to 16.8 days of holiday per year.

As mentioned previously, this will primarily impact those in the education and healthcare sectors, where seasonal and temporary work is more common.

Have questions about this article? Get in touch today!

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Company administrators cleared of breach of duty despite deficiency during sale of properties

By Yitong Guo

Today’s article comes from one of our solicitors, Yitong Guo, who specialises in property law. The article is about a dismissal application in the Chancery Division of the High Court concerning allegations of breach of duty by company administrators in relation to two companies (“the Companies”) whose business involved the development and sale of two properties (“the Properties”) in London.

In 2015, the properties were eventually sold to two different purchasers respectively, with the sale amounting to approximately £62 million.

As a result of the sales, Barclays Bank PLC, the primary secured funder to the Companies, recovered the whole of the principal amount totalling around £51.5 million, plus fees and interest. There was still a shortfall in the region of £10 million, however.

The case in question is Swiss Cottage Properties Limited (in liquidation); Fitzroy Street Capital Inc and another v Manning and another. It shows that deficiency does not necessarily amount to breach of duty when it comes to property, where loss is not proved.

The application

The Applicants in this proceeding, being an unsecured and junior secured creditor of the Companies, received nothing from the Administrations.

The Applicants averred that insufficient value was realised from the Properties, and made a number of the allegations of wrongdoing against the Administrators under two grounds:

1. The Administrators had acted ultra vires by entering into contractual arrangements with one of the purchasers; such arrangements were said to involve disposition of the Properties, which were subject to fixed charge securities in favour of the junior secured creditors but without first obtaining the permission of the court pursuant to Schedule B1, Paragraph 71 of the Insolvency Act 1986 (IA 1986).

2. The Administrators had breached their duty in that the Administrators had ignored or paid insufficient regard to the interests of the junior secured creditors, and that the efforts undertaken to market the Properties were inadequate with the result that they were sold for below market value.

Under this head of claim, the Applicants alleged the following specific breaches of duty, namely that the Administrators (see Judgement para 5):

“a) failed to understand the market value of the Properties;

1. b) failed to understand the identity and interests of the creditors with fixed charge securities over the Properties and the value of the interests secured;

2. c) failed to perform their functions in the interests of the creditors as a whole and to act impartially in balancing the competing interests of individual creditors;

3. d) failed to provide creditors with sufficient information to allow them to participate in the collective administration regime in a meaningful way;

4. e) failed to take reasonable care to obtain the best price for the Properties which the circumstances of the case permitted.”

Mr Justice Adam Johnson presented an in-depth inspection into the Administrators’ conduct on marketing, valuation and sale process of the Properties before giving his legal argument.

The legal arguments

The Applicants’ primary claim relies on Insolvency Act 1986, Sch B1, para. 71: that the Administrators acted unlawfully and/or in breach of their custodial or stewardship duty by disposing of the Properties which were subject to fixed charge securities in favour junior secured creditors, as if they were not subject to those securities and without obtaining the permission of the Court.

This argument was rejected by the Judge who considered that entering the said contractual arrangement did not in fact involve any disposal of the property by the Administrators as if not subject to the Applicants’ security. As in the ordinary course, Administrators have no power to dispose of property in a manner which overrides a creditor’s security interest, at least not without the creditor’s consent.

The Judge shrewdly pointed out the obvious: “Administrators are agents for the company over which they are appointed and have no greater power to make a disposal free of such an interest than the company itself would have. Any attempt to do so would be bound to fail: the purchaser would be bound by the security interest, and if the company (or the Administrators) had contracted on the basis that the security interest was overridden, then it (or they) would be in breach of contract.

…. it seems to me that the Administrators contracted on the basis that they would cause one of three things to happen at completion: (i) they would procure consent of secured creditors who would deliver the Land Registry DS1 forms; (ii) they would make an application to the Court under Sch. B1, para. 71; or (iii) they would procure that Barclays sold as mortgagee in possession. None of these alternatives, however, contemplated that the Companies would transfer a beneficial interest in the Properties free from the second-ranking charge prior to completion. On the contrary, each contemplated that an act from a third party independent of the Administrators would be needed in order for completion to take place. That structure, as it seems to me, is quite inconsistent with the idea that there was any immediate disposal of an interest in the Properties not subject to the existing security interests.”

Previous cases cited

On the alternative claim under the breach of duty claim, shortcomings and deficiencies in the conduct of the Administrators had been admitted and identified. Several legal standards and principles on standard of care and duty of administrators were cited and considered in assessing the conduct of the Administrators and their duty of care.

The basic legal standard on the relevant standard of care Re Charnley Davies (No. 2)[1990] BCLC 760 (at 775e-776a):

“It is to be observed that it is not an absolute duty to obtain the best price that circumstances permit, but only to take reasonable care to do so; and in my judgment that means the best price that circumstances as he reasonably perceives them to be permit. He is not to be made liable because his perception is wrong, unless it is unreasonable.”

The overall position Davey v Money[2018] Bus LR 1903:

“An administrator must be a professional insolvency practitioner. A complaint that he has failed to take reasonable care in the sale of the company’s assets is, therefore, a complaint of professional negligence and in my judgment the established principles applicable to cases of professional negligence are equally applicable in such a case. It follows that the administrator is to be judged, not by the standards of the most meticulous and conscientious member of his profession, but by those of an ordinary, skilled practitioner. In order to succeed the claimant must establish that the administrator has made an error which a reasonably skilled and careful insolvency practitioner would not have made.”

On the general duty to act with reasonable care and skill Brewer v Iqbal [2019] EWHC 182

“Failure to understand the nature of the intangible asset, and the true value of the EPGs, led to a failure to properly market the EPGs. These constituted a failure to act with reasonable care and skill.”

On the court’s position that it will generally not question the administrator’s commercial judgment unless it is under the grounds of wrongly applying the law or is conspicuously unfair to a particular creditor. Lightman & Moss:

“…a broad judicial understanding of the nature of the administrator’s task and the challenges that he faces on appointment; an appreciation, in particular, that the administrator will invariably be operating at pace in difficult and urgent circumstances which dictate the need for quick decision-making, often based on less than perfect information, if value is to be preserved. It also reflects an institutional judgment that licensed professionals are better placed than the court to formulate and implement commercial strategy according to the circumstances in which they find themselves.”

The principle that an administrator is entitled to rely on appropriate professional advice in carrying out his duties and will not be liable in negligence if the advice relied on appears to be competent: Davey v. Money. It is up to the administrators to establish that such reliance was reasonable in the circumstances: One Blackfriars.

The judgement

In light of the above, there were several deficiencies in the Administrators’ conduct that had been identified including lack of care, failure in engaging with second-ranking junior secured creditor, failure in explaining and circulating information and unreasonable imposition of deadline. However there had been no findings for breach of duty owed towards the Applicants.

The judgement went on to consider whether any of those deficiencies caused loss to the Applicants. That depends on assessing whether the overall outcome is likely to have been different for the Applicants, had the Administrators’ duties been fully complied with. The conclusion is it had not, because the Properties were sold for their market value, or for the best price reasonably achievable, it follows that whatever deficiencies there were in the Administrators’ conduct, they did not result in financial loss to the Applicants.

The Judge further dismissed the point made by the Applicants that they were deprived of the opportunity to participate in the Administrations in a more active way. This is because: “whatever the deficiencies in the Administrators’ conduct, the fact was that BMBAR and BMBSCI were sufficiently aware of what was proposed in relation to the marketing of the Properties, and if they had considered there was a real prospect of value being lost, they could and would have behaved differently than they in fact did. There is no good reason to think they would have behaved in any different manner, or that there would have been a different outcome overall, if the Administrators had engaged with them in a more formally correct way, including by means of a creditors’ meeting if BMBSCI and BMBAR had chosen to call for one.”

Our thoughts

Although there were some deficiencies in the conduct of the Administrations, the Applicants’ claims failed and were dismissed. Under the circumstances, the Administrators had not acted unlawfully. There is no realistic prospect that in a counterfactual scenario in which the Administrators had engaged differently with the secured creditors, any different outcome would have been achieved; and there had been no financial loss caused to the Applicants despite Administrators’ deficiencies in conduct.

Have questions about this article? Get in touch today!

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Welcome Wilson

We are delighted to welcome our newest colleague, Wilson Chan. Wilson joins us as a paralegal and has already shown a great level of knowledge and enthusiasm since joining.

Wilson achieved his master’s degree in financial economics from University of Warwick in 2012 (passing with Merit) and achieved an Advanced Diploma in Legal Studies from University of Hong Kong, School of Professional and Continuing Education in 2018 (passing with Distinction).

He worked as a Legal Executive in a medium-sized law firm in Hong Kong for around 8 years (from 2014 to 2022). His expertise is in litigation, family and insolvency areas and he also has a lot of experience in property law and conveyancing cases.

In his spare time, Wilson enjoys cooking and playing football with friends. He is multilingual, being fluent in Cantonese, Mandarin and English.

Have questions about this article? Get in touch today!

Call us on 020 7928 0276, our phone lines are open and we will be taking calls from 9:30am to 6:00pm.

Email us on info@lisaslaw.co.uk.

Use the Ask Lisa function on our website. Simply enter your details and leave a message, we will get right back to you: https://lisaslaw.co.uk/ask-question/

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Home Office announces British citizenship application fee waiver for minors who can’t afford it following legal battle

By Xinru Jia

A person officially becomes a British Citizen when they apply to the Home Office and are able to show they are entitled to British Citizenship. This is achieved by providing evidence that they fulfil certain sections of the British Nationality Act 1981.

Most applications to the Home Office have a fee. Typically, applications for registration as a British citizen cost around £1012, which is now five times the European average for application fees! It is also the same fee for children to apply. Many families face unaffordable fees, and many more children who already meet strict eligibility criteria are barred from applying altogether.

The high fees that children or their parents have to pay to obtain British citizenship have been challenged for years. Children who are entitled to register as UK citizens but may be prevented by high costs or lack of access to legal advice may lose their rights and benefits. For some families, parents must work hard or even borrow money to pay the fees. In families with multiple children, parents may even have to choose which of their children can register as British and which cannot.

Life is tough for kids who can’t register as British. They have to pay extra tuition as international students at school, they don’t have access to student loans, they don’t have civic rights like voting, and so on. On the other hand, living in the UK without British citizenship also makes them feel “alienated, sub-optimal and not fully integrated into the cultural and social fabric of the UK,” as one High Court judge put it. Following the case of R (Project for the Registration of Children As British Citizens & Anor) v Secretary of State for the Home Department [2021] EWCA Civ 193, the situation has now been changed.

R (Project for the Registration of Children As British Citizens & Anor) v Secretary of State for the Home Department [2021]

The first claimant, O, was born in the United Kingdom in July 2007, attends school, and has never left the UK. She has Nigerian citizenship, but since turning 10 she has satisfied the requirements to apply for registration as a British citizen under section 1(4) of the British Nationality Act 1981. O applied to be registered as a British citizen on 15 December 2017 but was unable to afford the full amount of the fee, which was £973 at that time. It was not disputed that many children and their families cannot afford the fee charged when an applicant is a child.

As the full fee was not paid, the Secretary of State for the Home Department refused to process O’s application. O was joined in her challenge by The Project for the Registration of Children as British Citizens, which focuses directly on right to British citizenship for young adults and children. The Immigration Act 2014 empowers the Secretary of State to set the fees for applications to obtain British citizenship in subordinate legislation, having regard only to the matters listed in section 68(9) of the 2014 Act. Those matters include not only the cost of processing the application but also the benefits that are likely to accrue from obtaining British citizenship and the costs of exercising other functions in relation to immigration and nationality.

The current level of the fee produces a substantial surplus, over the administrative cost of processing an application to be applied, to subsidize other parts of the immigration and nationality system. Lord Hodge then turns to the appellants’ submissions. He notes that the appeal is not concerned with fundamental or constitutional common law rights, nor are any Convention rights under the Human Rights Act 1998 engaged. The special rules of construction that are applicable when the principle of legality is infringed or the constitutional right of access to the courts is intruded upon therefore do not apply.

The appellants’ argument based on the constitutional right of access to the courts, therefore, has no application to the present case. The Supreme Court rejected that argument and ruled: “The appropriateness of imposing the fee on children who apply for British citizenship under section 1(4) of the 1981 Act is a question of policy which is for political determination. It is not a matter for judges for whom the question is the much narrower one of whether Parliament has authorised the Secretary of State to set the impugned fee at the level which it has been set.”

Fee for registering children as British citizens is unlawful

Upholding an earlier High Court decision, the Court of Appeal has confirmed that the Home Office’s £1,012 fee for registering children as British citizens is unlawful. The challenge succeeded on the ground that the Secretary of State failed to discharge her duty under section 55 of the Borders, Citizenship and Immigration Act 2009 to have regard to the need to safeguard and promote the welfare of children when setting the fee. This is a massive win for the claimant ‘O’, for the Project for the Registration of Children as British Citizens (PRCBC), and for their legal teams. The Court of Appeal certainly agrees that it is not disputed by anyone, least of all by the Secretary of State, that British citizenship is a status of importance to those that hold it and that the entitlement to be registered as a British citizen is likewise a right of importance. (Lord Justice David Richards, paragraph 32.)

After the legal challenge by the Project for the Registration of Children as British Citizens (PRCBC), the government recognized that the current £1012 child citizenship fee can often be unaffordable and needed to be reviewed. The Home Office has since published a new policy that allows for anyone under the age of 18 who is eligible to register for British citizenship to have their application fee waived if they cannot afford it, which includes:

Children applying to be registered as UK citizens are exempt from paying fees if the child and their parents or guardians can demonstrate that they cannot afford the fees
Free for children in the care of local authorities
Apply for a fee waiver for children registered outside the UK as UK citizens and in a situation similar to the care of a local authority
Relevant waivers of fees for citizenship ceremonies or citizenship oaths and administration of oaths

To qualify for the fee waiver, the child who is applying for registration – and their parents – must prove that ‘they do not have sufficient funds at their disposal to pay the required fee after meeting their essential living needs, and continuing to meet any other child’s essential needs, such as housing and food‘. This means that in order to pass the ‘affordability test’ the person who is applying (and those who support them financially) must be unable to pay the fee if they are also meant to be able to pay for essential needs. This includes things like housing, food, clothing, medication, and cleaning products. You must then prove this to the Home Office with clear and compelling evidence.

When considering a fee waiver application, the Home Office will consider things like income, savings in a bank or building society account, or even financial support that you might receive from a charity or NGO. If the Home Office is satisfied that the evidence you provide shows that you would not be able to afford the application fee whilst also meeting your other needs, the fee waiver will be granted. There is no fee waiver for citizenship applications made by adults.

This guidance applies to the following types of applications:

Form MN1: Registration of children under the age of 18
Form S2 and S3: Registration as a British citizen if you are a stateless person
Form T: Registration as a British citizen if you were born in the UK on or after 1 January 1983 and lived here until you were 10 years old
Form B(OS): Registration as a British citizen if you are a British Overseas citizen, British subject, British protected person, or British National (Overseas) and have no other citizenship or nationality
Form B(OTA): Registration as a British citizen if you are a British Overseas Territories citizen, a British Overseas citizen, a British protected person, a British subject or a British National (Overseas)
Form EM: Registration as a British Citizen through residence in Hong Kong
before 1997

Further comments

In principle, this is an important and welcomed response to the long-standing challenge of citizenship registration fees. Nonetheless, there is a need to examine the policy more closely and monitor its application in practice to assess its effectiveness in enabling children who cannot afford it to exercise British citizenship.

Have questions about this article? Get in touch today!

Call us on 020 7928 0276, our phone lines are open and we will be taking calls from 9:30am to 6:00pm.

Email us on info@lisaslaw.co.uk.

Use the Ask Lisa function on our website. Simply enter your details and leave a message, we will get right back to you: https://lisaslaw.co.uk/ask-question/

Or, download our free app! You can launch an enquiry, scan over documents, check progress on your case and much more!

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Lisa’s Law celebrates 10-year anniversary!

Lisa’s Law is now 10 years old! After starting with a mere desk in an office in Elephant and Castle, London, in 2012, Lisa’s Law has grown from strength to strength. Fast forward to 2022, as we celebrate our 10-year anniversary, and the company now numbers almost 50 employees and has three London offices.

To celebrate the 10-year anniversary of Lisa’s Law, we hosted a social event last month at a local restaurant in the area with all of our staff. It was fantastic for everyone to be able to get together, enjoy some food, a few drinks (and a few more!) and be able to catch up outside of work.

Led by the vision and drive of our founder and Managing Director, Chuanli Ding, Lisa’s Law couldn’t have got to where it is today without the hard work of all the staff who have contributed over the years, as well as the trust put in us by our loyal clients. Our promise to clients has always been “you instruct, we act”, and our target is to always provide good client service with a competitive price. We pride ourselves on our ability to provide swift solutions to any legal problems or enquiries clients have.

As part of our anniversary celebrations, we also hosted a competition to give back to our loyal customers and followers, with prizes worth £2000 overall. This included three prizes for each of our social media platforms including Twitter, Facebook, LinkedIn, WeChat and LittleRedBook.

Vouchers chosen by the competition winners included those from Amazon, iTunes and Love2Shop. It was great to see some of the comments and feedback regarding the service we had provided and about our blogs and social media, which aims to keep our followers up to date on the latest developments across our legal practise areas. We look forward to hosting further competitions in the future.

Some of the lovely comments we had from entrants to the competition included the following:

I am learning everyday from your posts and been teaching most of the laws I learnt to my kids. You are the most educating page I have been able to come across. Please continue your good works.
I love your updates. Verified and helpful. Your services are awesome. My friend who add an appointment year ago confirms that. Keep doing your great job. Happy anniversary
Good customer service, trustworthy and reliable. @lisaslawsolicitors has been provided quality service. Happy anniversary
Has to be the fact, your social media keeps relevant to moving times, policies and bills. Good to know where to come to find that.

We look forward to continuing to grow and progress as a company. Let’s see what the next ten years brings! Thanks once again to all of our clients who have helped us get to where we are today.

Have questions about this article? Get in touch today!

Call us on 020 7928 0276, our phone lines are open and we will be taking calls from 9:30am to 6:00pm.

Email us on info@lisaslaw.co.uk.

Use the Ask Lisa function on our website. Simply enter your details and leave a message, we will get right back to you: https://lisaslaw.co.uk/ask-question/

Or, download our free app! You can launch an enquiry, scan over documents, check progress on your case and much more!

lisaslaw@web

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Sir Mo Farah’s revelation sheds a light on the dark world of human trafficking

It was one of the major talking points of the week. The British icon and most successful track distance runner of all time, Sir Mo Farah, revealed this week that the story he had told the world was, in fact, not true.

Mo Farah (as he is now known), was born as Hussein Abdi Kahin in Somaliland. After losing his father at a young age and being sent by his mother to nearby Djibouti, he was then illegally trafficked to the UK at the age of nine under the name Mohammed Farah and forced to work as a domestic servant. He had originally told the world that he had left Somalia aged eight to join his father. In reality, his father was killed in a civil war in Somaliland.

His PE teacher subsequently rescued him from his domestic servitude situation and helped him to apply for British citizenship under the name Mohammed Farah. Farah would go on to be an icon of British sport, a role model for young runners, and a knight. However it wasn’t until July 2022 that his true story was revealed.

The revelation comes during a time when the UK debate over immigration is highly fractious. The Rwanda policy (which we talked in about recent articles (see here)) has been delayed by the courts but is likely to continue given that it is supported by all of the Conservative leadership hopefuls. Whether Farah’s story has a lasting impact on the immigration debate remains to be seen.

But what does Farah’s case tell us about human trafficking in the UK, and would it have been quite so easy for someone like him to gain citizenship today? Keep reading to find out.

What can we learn about this case from a legal perspective?

Firstly, it’s important to point out that the Home Office have made it clear that they won’t be taking action against Sir Mo. Whether this would be the case if he wasn’t one of Britain’s most successful Olympians and a knight of the realm is another matter. To emphasise this point, it was made clear to Farah by his barrister that his British citizenship could be at risk because it was obtained “by fraud or misrepresentations” given that his real name was not Mohammed Farah. However, the Home Office made clear that they wouldn’t be taking action because the assumption is that a child is not complicit when a citizenship is gained by deception.

The case also brings to light the extent to which human trafficking and domestic servitude blights the UK. In 2020, the US State Department estimated that there were approximately 13,000 trafficking victims in the UK. 2021 saw a 10% rise in the number of child trafficking victims who have been identified in the UK, a total of 5,468. 2,477 of these are children, like Mo Farah, who had been trafficked into the UK. While the UK does clearly suffer from the blight of human trafficking, it is also ranked as a Tier-1 country in the US State Department’s annual report. This means that it complies with the minimum standard set by the Trafficking Victims Protection Act of 2000.

The Nationality and Borders Act 2022

While the approach towards tackling human trafficking has improved in the UK with the introduction of the Modern Slavery Act 2015, experts say that the Nationality and Borders Act 2022 has potentially made child victims of human trafficking less likely to come forward. The Nationality and Borders Act can result in a case being weakened if a victim of human trafficking does not come forward quickly, and the process of age-processing young asylum seekers has been taken away from social workers and put in the hands of border officials.

With only 2% of child trafficking victims being granted discretionary leave to remain according to government figures, something they are entitled to under international law. Furthermore, of all over 18’s who were trafficked illegally to the UK as unaccompanied children, just 35% were initially refused asylum in 2020. This puts current and future victims in a very difficult position. The creation of a two-tier asylum system in the Nationality and Borders Act creates a distinction between those who arrived in the UK legally, Group 1, and those who arrive in the UK illegally, Group 2. Farah would therefore have fallen into the Group 2 category, meaning that his route to citizenship would be longer. His path to citizenship now would have been temporary asylum status under the 10-year route, despite not having any control of his actions as a child.

What will happen now?

While Farah has been absolved of any wrongdoing by the police and told by the Home Office that “no action will be taken whatsoever against Sir Mo”, this does not mean that the matter is over. The Metropolitan Police have subsequently launched an investigation into the claims by Farah that he was trafficked into the UK and forced into domestic servitude. This will include investigating the couple which brought him into the UK and made him cook, clean and babysit. We wait to see if anything comes of this investigation.

Our comments

Firstly, we must commend Farah for his bravery in revealing the truth to the world about his true identity and the circumstances which brought him to the UK. Now 39, and no longer an Olympic athlete, it would have been easy for him to continue life with the spotlight off him. Sir Mo’s story has shed a light on the dark underbelly of human trafficking, and one would hope that it may help people and those in positions of power to sympathise with victims of similar circumstances. While we celebrate Farah’s achievements and the fact that the Home Office was so quick to reassure people that there was no threat to his British citizenship, it clearly should not be the case that the same is not true for those with a much lower profile.

Have questions about this article? Get in touch today!

Call us on 020 7928 0276, our phone lines are open and we will be taking calls from 9:30am to 6:00pm.

Email us on info@lisaslaw.co.uk.

Use the Ask Lisa function on our website. Simply enter your details and leave a message, we will get right back to you: https://lisaslaw.co.uk/ask-question/

Or, download our free app! You can launch an enquiry, scan over documents, check progress on your case and much more!

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Is breakfast cereal junk food? Yes, according to the High Court!

Is breakfast cereal junk food? That’s what the High Court decided recently when the cereal manufacturer, Kellogg’s, failed in its legal challenge against the government’s new food strategy.

The proposed regulations by the Department for Health and Social Care would mean that foods which are high in fat, salt and sugar would be banned from promotional offers such as buy one get one free and extra free. The measures are set to come in in October 2022.

Kellogg’s claimed that because their cereal is eaten with milk, this means that they should not come under the category of junk food. This was however dismissed on the basis that the addition of milk would not affect the fact that the cereal was already high in sugar.

Keep reading to learn more about this case.

The government’s anti-obesity strategy

As mentioned before, foods considered to be high in fat, salt, and sugar (HFSS) will be prevented from being able to take part in promotional offers from October 2022. These foods will also be unable to be displayed in high profile locations such as checkouts, shop entrances and aisle ends.

Kellogg’s contention with the regulations is driven by the fact that 54.7% of its products are classed as ‘less healthy’, a term the government uses to define these HFSS foods. Furthermore, 30% of Kellogg’s HFSS foods are sold through location promotions, which will cost the company £5m in profit according to the manufacturer.

The measures have caused a debate in the UK, with some finding it perverse to introduce regulations banning promotion on food during a cost-of-living crisis and at a time when millions of Britons also use food banks.

Nevertheless, there was also a sharp rise in childhood obesity during the Covid pandemic, with 14.4% of 4- and 5-year-olds now classed as obese compared to 9.9% in 2019/2020. In fact, while the measures were originally intended to be introduced in May, they were delayed until October over concerns by Boris Johnson over the cost-of-living crisis.

High Court dismisses Kellogg’s argument

Kellogg’s main argument was that unlike other HFSS foods, cereal is nearly always eaten with milk. Tom Hickman, QC, and counsel for Kellogg, made the case that because cereals are ‘overwhelmingly consumed with milk’, the overall proportion of sugar and salt is slashed and that therefore they shouldn’t be classed as junk food.

While Kellogg’s products like Coco Pops, Frosties, and Crunchy Nut are being measured without the inclusion of milk, other products such as hot chocolate or soup are being assessed with the inclusion of milk or water. Kellogg’s claim that their breakfast cereals are a ‘dehydrated food’, which are intended to absorb liquid which subsequently transforms its shape and texture. However, unlike tins of hot chocolate or soup you find in the supermarket, cereal can be eaten dry. This is certainly a hole in the argument made by Kellogg’s.

Kellogg’s also criticised the way the regulations had been developed, stating that they did not receive proper parliamentary scrutiny. Justice Linden dismissed this idea, pointing out that none of the breakfast cereal manufacturers raised the fact that they didn’t agree with the cereals being judged ‘as sold’ rather than ‘as consumed’, the latter of which formed the basis of Kellogg’s argument.

Following the outcome of the case, Kellogg’s have stated publicly that they will not be appealing against the verdict which the High Court came to. Kellogg’s also warned that this could subsequently result in higher prices for consumers once the regulations come in due to the lost profits which are expected to follow.

Our comments

We think it’s fair to say that the conclusion reached by the High Court in this case is one which the majority of people wouldn’t have too many arguments against. While they may not necessarily agree with the regulations themselves, Kellogg’s didn’t have a particularly strong case in arguing that because of the milk which is generally added to cereal, this means that its products should somehow be excluded from being classed as high in sugar, when they are in fact high in sugar.

However, there may be a happy outcome for Kellogg’s. Following the resignation of Boris Johnson as Prime Minister, the outcome of the Conservative leadership contest will determine whether or not the regulations come into effect in October, or indeed at all.

Have questions about this article? Get in touch today!

Call us on 020 7928 0276, our phone lines are open and we will be taking calls from 9:30am to 6:00pm.

Email us on info@lisaslaw.co.uk.

Use the Ask Lisa function on our website. Simply enter your details and leave a message, we will get right back to you: https://lisaslaw.co.uk/ask-question/

Or, download our free app! You can launch an enquiry, scan over documents, check progress on your case and much more!

lisaslaw@web

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