Appeal Court Spells Out Sentencing Policy for Insider Dealing

Insider dealers can expect substantial jail terms following guidance issued by the Court of Appeal.

The advice was given during the summing up in the unsuccessful appeal of solicitor Christopher McQuoid against an eight-month prison sentence for his part in a deal resulting in an illegal profit of nearly £50,000.

Insider dealing is an offence under the Criminal Justice Act 1993 and carries a maximum jail term of seven years. The offence is committed when a person trades in or assists another person to trade in shares or other securities, with the benefit of access to information not at the time in the public domain.

The Appeal Court judges stated that the following factors should be taken into account when deciding the appropriate sentence:

1. The nature of the defendant’s employment or other involvement that put him in a position to take illegal advantage of inside information;

2. The circumstances in which the inside information came into the possession of the defendant and the use made of the information;

3. Whether the defendant behaved recklessly or acted deliberately and dishonestly;

4. The degree of planning and sophistication involved in this activity, as well as the period of unlawful trading and the number of individual trades;

5. Whether the defendant acted alone or with accomplices and, if so, the relative culpability of each party;

6. The amount of anticipated or intended financial benefit (or loss avoided) as well as the actual benefit (or loss avoided);

7. Although the absence of any identified victim should not normally be taken in mitigation, the impact, if any, where proved, on any individual victim should be taken into account; and

8. The impact of the offence on public confidence in the integrity of the market, taking into account the impact on public confidence of an offence committed jointly by more than one person trusted with confidential information.

Age and a guilty plea should also be taken into account, as should good character, although it should also be borne in mind that the individual of good character, by misusing the information, has breached the trust vested in him as a result of his good character.

In assessing sentence, full weight must be given, said the judges, to the impact on the appellant and his family, as well as the destruction of his professional reputation.

“This guidance shows how seriously the courts now take insider dealing,” says Richard Dale. “Substantial custodial sentences are likely to result from any such activity.”

Partner Note

Court of Appeal: R v McQuoid Criminal Division, 10 June 2009. See

http://business.timesonline.co.uk/tol/business/law/reports/article6555930.ece.

Dale and Co. Solicitors Lincoln Disclaimer

Supervision Failure Costs Council

A county council was found negligent when a pupil was injured during a break at school when he was hit by a rock thrown by another pupil.

The case turned on a simple point – was it sufficient (as was the case in this instance) to have only one supervisor overseeing 150 children?

The Court of Appeal found the council negligent, especially as one of the prime purposes of having the children supervised was to prevent dangerous activities or stop them if they occurred.

A recent survey of local councils revealed that in the year 2008-2009 almost £3 million was paid out in compensation to children hurt in accidents at school. This figure represents an increase of £1 million on the previous year.

Parents have a legitimate expectation that the schools their children attend will be safe places and if the school fails to take reasonable precautions to ensure this is so, they have the right to hold the council (or other body responsible) liable.

Partner Note

Palmer v Cornwall County Council [2009] EWCA Civ 456.

Dale & Co. Solicitors Lincoln Disclaimer

Duty of Care to Employees – Obvious Risks

Every employer owes a duty of care to its employees, but deciding who is responsible for an accident can be very difficult when the issue is whether warnings against risks should have been given or, if given, were adequate.

Employers often argue that employees are responsible for their own actions, but employers have a duty to warn employees of potential risks in the workplace, even if these are obvious. A recent case has confirmed that some risks are so obvious that warnings need not be given, for example where to argue a lack of awareness of the risk would be absurd. However, it is hard to distinguish between what would be deemed to be that obvious and what would not.

In the case in point, an employee turned a box upside down in order to reach material on a top shelf. The box slipped from underneath him, causing him to fall and sustain injury. The employee’s case failed both in the lower court and on appeal because the employer had specifically warned all employees that the use of boxes for this purpose was unsafe and had provided a safe alternative for reaching high items.

The Court of Appeal said that an employer is responsible for devising safe working methods and practices and, where they have issued a warning against a specific risk, they should not be held liable for an injury to an employee who ignored the warning. The judge commented that ‘some dangers are so obvious that no instruction is required’ but this would not have been the case in this instance. Had the employer not warned of the potential risks attached to using the box for this task, the argument that the employee was capable of appreciating the risk for himself would have been rejected.

What constitutes a sufficient warning is a grey area and is an issue of fact, not law, so previous case rulings provide little assistance as each case is judged on its own facts. In an unreported case, an employer was held to be liable for an injury sustained by an employee who had mopped a floor and then slipped on the wet surface she created. The employer argued that it was obvious that the floor would be wet immediately after mopping and that it needed to be dry mopped to be safe. This argument was rejected by the court, however.

It has been suggested that an employer is only under an obligation to warn employees of risks that fit within the broad remit of the employee’s job description. For example, if an employee were to put his fingers into an electrical socket, the employer would not be liable for the resulting injury as this was not a part of their ‘system of work’. In contrast, an employee who has been asked to rectify a paper jam in a photocopier should be warned of the risks. In some circumstances, an employer may decide to let experienced employees devise their own safe working practices in relation to certain tasks but, ultimately, it is the employer’s responsibility to assess and warn against workplace risks.

The best way to safeguard against potential claims is to warn against all potential risks, however obvious. Ensuring a full risk assessment of tasks is carried out and that all staff are trained properly is paramount.

Contact us for advice on commercial and business law.

Partner Note
Ammah v Kuehne & Nagel Logistics Ltd. [2009] EWCA Civ 11, [2009] All ER (D) 155 (Jan).


Dale & Co. Solicitors Lincoln Disclaimer

Ignoring Court Demands is Costly

In litigation, it is common for the court to order the production of documents from the parties to the case. Failing to comply with such orders is unwise, as the court has the power to strike out (i.e. refuse to hear) a case unless the documents are produced. It will issue an ‘unless order’, which in simple terms states that unless the requested material is produced, the case will be struck out.

There are several criteria the court will apply when considering an application for relief against an unless order. These include considering whether the administration of justice will be served, whether the failure to supply the requested information is intentional and the extent to which the person has complied with other requests, orders etc.

In a recent case, the ex-husband of a woman failed to comply with an order of the court to produce documents and information relating to a property dispute. He applied for relief against the unless order and the case reached the Court of Appeal. One of the arguments employed was that striking out his claim because of non-compliance with the order would breach his human rights under Article 6 of the European Convention on Human Rights. His appeal was rejected.

Says Richard Dale, “When disclosure of documents is required by the court, the demand must be treated seriously. Ultimately, failing to comply with the court’s rulings can result in your case simply being rejected.”


Partner Note
Momson v Azeez [2009] EWCA Civ 202.


Dale & Co. Solicitors Lincoln Disclaimer

Letting Agent’s Commission Terms Unfair

Unclear language in a letting agent’s standard terms and conditions has led to a contract being set aside by the High Court.

The case concerned the estate agent Foxtons, which provides a lettings service to private landlords under a standard form of agreement. The Office of Fair Trading (OFT) had applied to the Court for orders against Foxtons for what the OFT deemed to be unfair terms in agreements between the estate agents and various landlords. The terms in question related to renewal commissions.

Foxtons hoped to rely on regulations passed in 1999 relating to unfair terms in consumer contracts. These stipulate that where a term is in ‘plain intelligible language’, the assessment of fairness of a term shall not relate to the price or remuneration as against the goods or services supplied in exchange.

The Court held, however, that the relevant terms for renewal commission within the old version of Foxtons’ contract had not been drafted in plain and intelligible language and so the obligation to pay renewal commission under the relevant terms of the agreement did not escape a fairness test under the regulations.

As far as the actual fairness of the terms was concerned, the Court considered it unlikely that the typical private landlord would expect a repeat bill in year two of a letting and beyond unless the point was spelled out in some way. It was felt that Foxtons had not used a fair and adequate method of bringing the renewal commission clause to the attention of the landlords.

Under the circumstances, the renewal commission clauses of Foxtons’ old standard terms and conditions were held to be unfair.

“This case illustrates the importance of drafting agreements in clear and precise terms,” says Zoe Smith. “We can advise you on any property or contract matter.”


Partner Note
Office of Fair Trading v Foxtons Ltd. [2009] EWHC 1681 (Ch). See
http://business.timesonline.co.uk/tol/business/law/reports/article6730718.ece.

The Unfair Terms in Consumer Contracts Regulations 1999 can be found at http://www.opsi.gov.uk/si/si1999/19992083.htm.


Dale & Co. Solicitors Lincoln Disclaimer

Non-Disclosure Does Affect Settlement

The Court of Appeal has taken the unusual step of considering an appeal in a matrimonial case which was settled by agreement before the appeal was heard.

In the High Court, the ex-wife of a wealthy man had failed to obtain an ‘uplift’ to her original settlement. She based her argument on the fact that at the time the settlement was being negotiated, her husband had not disclosed that he was in negotiation for a new position that would make him materially better off. Had he done so, she would not have agreed to the financial settlement. The District Judge had ruled that disclosure of the husband’s true expected future income would not have affected the settlement awarded.

The Court of Appeal decided to examine the facts of the case because it considered that the original judgment raised difficulties for practitioners. It concluded that had there been full and frank disclosure of the imminence of the new contract of employment, it was inconceivable that the wife would not have raised her sights. In the Court’s view, it was also inconceivable that, had it been disclosed, the District Judge would have rejected the information as irrelevant.

Accordingly, the District Judge was wrong to conclude that a full and frank disclosure would have made no difference to the settlement.

Says Richard Dale, “It is a relief that the Court of Appeal has reversed the earlier decision as the principle that both sides must make a full and frank disclosure of their financial positions when making a settlement on divorce must be right in principle and had the decision of the District Judge been left to stand, it would have encouraged a culture of non-disclosure.”


Partner Note
Bokor-Ingram v Bokor-Ingram [2009] EWCA Civ 412. See
http://www.familylawweek.co.uk/site.aspx?i=ed35696.


Dale & Co. Solicitors Lincoln Disclaimer

Get Ready for Compulsory Pensions

The Pensions Act 2008 contains provisions which will make it compulsory (from 2012) for an employer to enrol qualifying workers aged between 22 and the state pension age who earn more than a de minimus amount (currently set at £5,035 per annum) into a pension scheme and to make contributions to the scheme.

The employer will be required to contribute a minimum of 3 per cent of salary and the employee will be required to contribute a minimum of 4 per cent of salary, up to a maximum of (currently) £3,600 per annum.

There will be substantial fines for failure to comply with the new regulations. Clearly, there are likely to be many changes to the provisions between now and the planned implementation date of 2012, but this is a good time to start thinking through the potential impact of the new regime on your business.


Partner Note
The Pensions Act 2008 can be found at
http://www.opsi.gov.uk/acts/acts2008/ukpga_20080030_en_1.


Dale & Co. Solicitors Lincoln Disclaimer

Lasting Powers of Attorney

Our new Guide for Lasting Powers of Attorney is now available.

Contact us for your free copy!

Blow for Charities as Tax Man Moves Goalposts

Charities which acquire buildings face an unexpected blow following the announcement by HM Revenue and Customs (HMRC) that a concession relating to property used for charitable purposes is to be altered. The announcement came out of the blue, with no prior consultation having been held.

Currently, a charity pays no VAT on the acquisition or construction of a new building if it is 90 per cent used for charitable purposes. In practice, this means that charities can let part of their premises to defray costs and not suffer a VAT penalty. However, from 1 January 2010, the proportion of the property which must be used for charitable purposes to qualify for the concessionary treatment will rise to 95 per cent.

HMRC claim that the change will affect few charities and will lead to no increase in the tax take, which rather begs the question as to why it was thought necessary in the first place. HMRC are being subjected to heavy lobbying by representatives of charities, which are already struggling with the effect of the recession on donations. Do not be at all surprised if the Chancellor announces a U-turn in the autumn pre-budget statement. However, if this does not occur, charities considering building or acquiring properties should consider the implications of HMRC’s announcement.

Partner Note Reported in ICAEW Faculty Taxwire 463, 7 July 2009. See also http://www.hmrc.gov.uk/briefs/vat/brief3909.htm and http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageImport_ShowContent&propertyType=document&columns=1&id=HMCE_PROD1_029657.

Dale & Co. Solicitors Lincoln Disclaimer

Avoiding Payment by Bankruptcy Plan Fails

A husband who had himself declared bankrupt in order to avoid making a financial settlement to his ex-wife recently found his plan stymied by the court.

The man had many business interests and had purchased a substantial house through an Isle of Man company. When his wife issued a petition for divorce proceedings in 2006, she obtained freezing orders to prevent him from dissipating his assets. He then petitioned to be made bankrupt, claiming debts of £191,000. A few days before the bankruptcy petition was lodged with the court, he transferred the only issued share in the company to a third party, in breach of the freezing order. He was subsequently made bankrupt, but the order was not ‘sealed’.

The bankruptcy order was opposed by his ex-wife on two grounds. Firstly, that the judge could change his mind about granting the bankruptcy petition before it was sealed and secondly that a bankruptcy order can be annulled on the petition of a debtor.

The house was sold, yielding a surplus of £1 million which was paid into court. The company which had owned the property was then put into liquidation, with an alleged debt due to another company exceeding £1 million. The ex-wife claimed that the debt due to the second company was a sham and that her ex-husband had organised his affairs to ensure there was no money with which to make a financial settlement.

The ability of the ex-wife to obtain a settlement depended on getting her ex-husband’s bankruptcy order annulled. In order to do that, it had to be shown that he was capable of paying his debts at the time the order was made.

The application to annul the order was successful. Inevitably, the matter ended up in the Court of Appeal, which, after lengthy consideration, concluded that the husband was able to pay his debts when he was made bankrupt.

By this decision, the Court has sent out a warning to those who seek to avoid their liabilities through financial manipulations.

Concerned about arranging your Financial Settlement on Divorce? Contact the Dale and Co. Solicitors Lincoln Family Law Department.

Partner Note

Paulin v Paulin and Cativo Limited (In Liquidation) [2009] EWCA Civ 221. See

http://www.bailii.org/ew/cases/EWCA/Civ/2009/221.html.

Dale & Co. Solicitors Lincoln Disclaimer