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John Cato

Wildly Astray Intuition

By | Food for thought, news

I’m sure like me you were incredibly heartened by the Thai Cave rescue. It was a horrendous situation, but the bravery of the divers must be commended.

However, I have seen a few people describing the exercise as a ‘miracle’.

I have little doubt that the Thai government relied heavily on weather experts and flood hazard assessments carefully worked out to make a probabilistic risk assessment regarding the boys’ rescue.

All of us possess a super computer – it’s a fast, intuitive mode of thinking. It feels comfortable because it renders decision making fast, easy, intuitive.

In our ordinary lives it works well.

If we met a group of scientists trying to work out how to get a group of young boys out of a flooded cave 2 ½ miles under the surface of the world, we might not expect them to use their “intuition”.

Intuition reliably goes wildly astray when dealing with complexity and uncertainty.

Some solicitors (like us) – with some awareness of how the mind works, and its frailties – use a technique called “decision analysis” as a slow logical check on intuitive decision making; just like scientists check their intuitive decision with tried and trusted mathematical models and techniques.

Decision analysis is a tool used to value the multiple financial outcomes possible in litigation by looking at all of the possibilities, attempting to give an accurate judgment on the possible outcomes (what lawyers do anyway) to translate the client’s expectations into realistic probabilities.

It has to be admitted, that the assignment of a probability (in terms of a number) to a possible future event presupposes a frequency of similar events in the past which given an indication of their probability, and a lawyer is unable to work with those types of statistical models.

We work with precedent and evidence as applied to the facts to try and obtain the same result.

Here’s an example if you want to dig further without getting bogged down in legal jargon. It’s not strictly a legal video, but illustrates the point well:

https://www.youtube.com/watch?v=7OoKJHvsUbo

We normally draw up a decision tree by hand on intuitive modelling to start with and then begin to refine it.

We can then factor into it the facts we can prove, the facts which are doubtful, and the rule of law that applies in each scenario and thus build up a comprehensive picture for the client.

Costs recovery in law is only about 70% on a very good day. It is often unlikely that a client’s financial expectations will be met in a court of law and it is good for them to have an overview of outcomes based on agreed probabilities before they become committed.

The Best Bit of Advice About Litigation that no-one will ever tell you

By | news

By October 1939, on Germany’s western border, the Allies could have mustered 96 French divisions, 19 British, 22 Belgian and 10 Dutch, together with about 5,000 tanks and 1,000 aircraft.

 

While the German army was in Poland, the Germans kept 25 reserve divisions on their western border and virtually no tanks. This force would not have been able to withstand an Allied advance for more than a few days.

 

With the hindsight of history, the Allied forces should have invaded and occupied Germany, cutting off the German army from its supplies and prevented the Second World War?

 

The Germans took a huge gamble when they invaded Poland – they gambled the Allies would not attack.  They were right.

 

You do not know what your opponent is going to do!  You do not know the moves they are going to make!

 

What all potential litigants must do, as soon as a dispute looms, is go through a pre-action preparation routine (click the button on our website headed “seven questions to ask your solicitor”) and get all the divisions and power you can muster to the border as soon as possible. This is not necessarily to fight. You may be in a better position to mediate when your opponent can see the strength of your preparation and the advance of your position.

 

There is no general answer regarding whether you do this in secret or openly, or at what stage you show your preparation; it depends very much on the type of dispute.

 

For example, generally speaking, if we were helping a client plan a “boardroom coup,” we have to consider that the Companies Act 2006 does not really allow for surprise tactics.

 

For example, special notice is required for a resolution to remove a Director and a resolution to appoint somebody in their place; it is necessary to give notice of a board meeting to all Directors; a Director’s expulsion cannot be smuggled in behind “AOB.”

 

In that case it would be desirable to run through the initial steps (“seven questions…”) to understand whether your objectives are legally achievable, the impact they will have on the company and stakeholders and the company’s reputation and future governance and the range of possible responses you can expect from your opponents and how you will react.

 

So, for a “boardroom coup,” you would usually want to make preparations as secretly as possible before launching your invasion.

 

Former Solicitor Phil Shiner tries to offload assets before declaring himself bankrupt

By | news

Disgraced former solicitor Phil Shiner tried to offload assets worth nearly half a million pounds to family members before declaring himself bankrupt, it emerged today.

The Insolvency Service said in a notice that Shiner, the former director of human rights firm Public Interest Lawyers, gifted away his assets before asserting he would be unable to pay creditors.”

Not only has Mr. Shiner disgraced the profession by his conduct, he also seems to have been embarrassingly oblivious of the ordinary powers of a trustee in bankruptcy.

You cannot avoid your creditors by making gifts or entering into dodgy deals or stuffing it all in your pension before you go bankrupt.

Otherwise we could all borrow a very large sum of money, gift the house to the partner, take a loan from our mate with a sufficiently large interest rate clause to swallow up our income, put the rest of the spare cash, if any, into the pension, and with one bound – your own bankruptcy petition – you are free.

When a person has been declared bankrupt, certain types of antecedent transaction (a transaction entered into by the bankrupt before the start of the bankruptcy) may be challenged under provisions in the Insolvency Act 1986 (IA). Collectively, these are known as reviewable transactions.

The various ways in which a transaction may be challenged are:-

 

  • Transactions at an undervalue (section 339);

 

The bankrupt transferred an asset to someone else as a gift for no consideration or for significantly less than the asset’s true value.

 

  • Preferences (section 340);

 

Any transaction that put another person in a better position than the bankrupt’s other creditors.

 

  • Excessive pension contributions (section 342A);

 

Speaks for itself really, but the trustee in bankruptcy must show an intention of the bankrupt to put assets beyond the reach of creditors and an unfair prejudice to creditors.

 

  • Extortionate credit transactions (section 343);

 

The terms of a loan require the bankrupt to make grossly exorbitant payments or otherwise contravene the ordinary principles of fair dealing.

 

  • Transactions defrauding creditors (section 423).

 

Any transaction the bankrupt enters into as an undervalue in order to put assets beyond the reach of their creditors and frustrate their creditors’ claims.

Mr Shiner also seems to have been blissfully unaware of the presumption he was not acting in good faith when transacting with an associate or person who had notice of his bankruptcy.

Behind the News: Computer Hack Suspect Lauri Love wins his fight against extradition to the US.

By | news

You may recall that following the Gary McKinnon extradition case, the Home Secretary at the time, Theresa May, said she would legislate to introduce a “forum bar” to allow Defendants to argue in future cases that the offences alleged against them in a US extradition request can be “fairly and effectively” dealt with here.

Mr Love’s case relied, in part, on this “forum bar.”

At paragraph 43 and 44 the Lord Chief Justice said:-

What persuades us …………..is the nature of Mr Love’s connection to the United Kingdom. By itself, the fact that he is a British national, long resident here, with a girlfriend, and engaged in studies, would not have persuaded us that the decision [of the Judge below who allowed the extradition] was wrong. But there is a particular strength in the connection to his family and home circumstances provided by the nature of his medical conditions and the care and treatment they need. This is not just or even primarily the medical treatment he receives, but the stability and care which his parents provide. That could not be provided abroad. His entire well-being is bound up with the presence of his parents. This may now have been enhanced by the support of his girlfriend. The significance of the breaking of those connections, as we come to next, demonstrates their strength. We do not accept the submission that the connections make an overwhelming case, regardless of whether the other factors could not tell in favour of extradition. But they, with the other factors which we consider should have told against extradition, outweigh those factors favouring extradition sufficiently clearly to persuade us that the judge was wrong on this question. In this case the forum bar found in section 83A of the 2003 Act operates to prevent Mr Love’s extradition to the United States.

In clause 5 of their judgement the Court set out what is less well reported in the papers – what Mr. Love is accused of: –

In most of the attacks it is alleged Mr Love gained unauthorised access by exploiting vulnerabilities in a programme the computers ran known as Adobe ColdFusion; software designed to build and administer websites and databases (the “ColdFusion Attacks”). It is further alleged Mr Love also carried out “SQL Injection Attacks” in which unauthorised access was gained to computer databases by manipulating “structured query language”, computer programming language designed to retrieve and manage data on computer databases (the “SQL Injection Attacks”). Once inside the compromised computer systems, Mr Love and others placed hidden “shells” or “backdoors” within the networks. This allowed them to return and steal the confidential data which included telephone numbers, social security numbers, credit card details and salary information of employees, health care professionals, and service personnel.

In my view, these are accusations of extreme gravity – leaving a back door in computers so servicemen’s personal and financial details can be stolen.

On the Twitter site I saw comments such as that the threatened extradition “… violates his rights…” and “… US is being a bully… this is an atrocity” and “Shameful Lauri & his family were put through this ordeal…

In the light of the accusations, these comments sound ill-informed.

 

Cato Solicitors specialise in dispute resolution and construction law. Click here to contact one of the team.

Text message evidence

What is so important about Disclosure in Criminal Proceedings

By | news

Liam Allan was charged with 12 counts of rape and sexual assault, but his trial collapsed on day 3, the 15 December 2017, after police were ordered to hand over the mobile telephone evidence they held on a computer disk which contained 40,000 messages and revealed the alleged victim pestered Mr. Allan for “casual sex.”

This issue is critically important to all of us. It seems clear now that Mr. Allan was always innocent. The innocent person who has their life ruined by an unfair conviction is a terrible occurrence, but someday, perhaps, it could be you. The Rules set by Parliament, i.e. by all of us together, must be assiduously followed.

What you are reading in the newspapers is the tip of the iceberg.

In a recent report called “Making it Fair…” the Inspectorate of the Crown Prosecution Service (CPS) and Inspector of Constabulary published a report stating that in over half (55.5%) of the cases they reviewed there were obvious disclosure issues before a Defendant was charged. Prosecutors dealt fully with these issues in only one in four cases and in over a third (38.3%) of cases they were not dealt with at all.

Routine flaws with the process included the Police failing to make proper lists of material, the CPS failing to challenge poor quality schedules and, perhaps most worryingly, the revelation that disclosure by the police to the CPS of material that may undermine the Prosecution case or assist the defence case is rare!

What are the Rules the CPS and Police should follow?

The rules and guidance on disclosure in criminal cases before the Crown Court come from a number of sources, but the most important include the Criminal Procedure and Investigations Act 1996 (CPIA) and Part 15 of the Criminal Procedure Rules.

In short summary: –

  1. At the start of the case (usually in the Magistrate’s Court), the CPS will serve on the Defendant all the evidence it wishes to rely on at trial to prove their guilt.
  2. In the event the Defendant enters a not guilty plea, the CPS should disclose any other material it has to the Defendant (i.e., the material it does not wish to rely on) if it satisfies the test set out in Section 3 CPIA which states that such material must be disclosed if it: –

..might reasonably be considered capable of undermining the case for the Prosecution … or of assisting the case for the accused.

Examples of this type of material include:

  • previous convictions of Prosecution witnesses;
  • statements or other evidence collected which support the Defendant’s account;
  • documents which support the Defendant’s case, such as the texts from the rape complainant in the trial of Liam Allan showing she wanted and enjoyed the sex she later claimed was non-consensual.

Once the CPS has made its initial disclosure, the Defendant may file what is known as a “Defence Statement” which sets out the general nature of the defence and indicates matters of fact and law with which the Defendant takes issue.

Once the Defence Statement has been provided, the CPS must review its initial disclosure of unused material and determine if there is any further unused material in its possession which, in the light of the matters raised in the Defence Statement, the CPS now thinks might be deemed capable of undermining the case for the Prosecution or of assisting the Defendant’s case.

In other words, in Mr. Allan’s case, the police and the CPS would have had two bites at the cherry to get their disclosure obligations right.

The future

The CPS and the police are now, somewhat predictably, and disappointingly, blaming their failures on funding, but that is complete nonsense.

For those of us who have been around for a while, the Prosecution seems to have always had problems fulfilling its Disclosure obligations.

The Right Honourable Lord Justice Gross published a review of disclosure in criminal proceedings in September 2011 stating: –

Improvements in disclosure must – and can only – be prosecution led or driven. To achieve such improvements, it is essential that the Prosecution takes a grip on the case and its disclosure requirements from the very outset of the investigation.

Of course, if the police and CPS want to support their argument that their current failings are related to funding, they should produce their previous representations to the Ministry of Justice that funding is affecting their ability to make disclosure and ensure fair criminal trials – but do not hold your breath waiting for disclosure of that evidence either.

In my view the only answer, following years of consistent failure, is to enforce the Disclosure Rules thoroughly, by investigating each failure to ascertain whether it was an attempt to pervert the course of justice, and by making it clear in the terms of employment of both the Police and CPS, that such failures may lead to dismissal.

How the Supreme Court defined indirect discrimination in the case of “Essop.”

By | news

John Cato of Cato Solicitors explains how the Supreme Court defined indirect discrimination in the case of “Essop.”

Everyone has a pretty good understanding of direct discrimination.

Say an employer refuses to employ a person because they have a protected characteristic, listed in the Equality Act 2010 as: –

  1. Age
  2. Disability
  3. Gender reassignment
  4. Marriage and civil partnership
  5. Pregnancy and maternity
  6. Race
  7. Religion or belief
  8. Sex
  9. Sexual orientation;

then the employer has treated the potential employee less favourably than it treats or would treat others (Section 13) 1, (EqA 2010).

We could say, the employer is using a criterion to make a judgment.

So, if you apply for a job with us and on meeting you in interview I say – I cannot employ you because you are to old (1 above), then I will be applying the criterion of age.

Again, if an employer dismisses transgender employees on its workforce because of personal animosity, the criterion for continuing in employment with that particular employer is that you live in accordance with your sex at birth.

So, if an employer’s criterion is one of the protected characteristics, that is direct discrimination.

What if the employer had a criterion which was not directly discriminatory i.e. not referable to a protected characteristic, such as height – which is the usual example?

The Equality Act defines indirect discrimination as follows:

An employer (A) indirectly discriminates against an employee (B) where: –

  • A applies to B a provision, criterion or practice (PCP);
  • B has a protected characteristic;
  • A also applies (or would apply) that PCP to persons who do not share B’s protected characteristics;
  • The PCP puts or would put persons with whom B shares the protected characteristic at a particular disadvantage compared to others;
  • The PCP puts or would put B to that disadvantage;
  • A cannot justify the PCP – i.e. A cannot show it to be a proportionate means of achieving a legitimate aim. (i.e. British Airways may say that only well sighted people can apply for a job as an airline pilot. Such discrimination would be justified because it has the legitimate aim of airline safety).

In Essop and Others -v- the Home Office (UK Border Agency) (2017) UK SC 27, the Supreme Court considered indirect discrimination and the factors required to establish it and gave very useful guidance.

In order to be promoted within the Home Office to a higher level, staff had to pass a Core Skills Assessment test (CSA).

The Claimants, who were from Black and Minority Ethnic (BME) backgrounds and over 35 failed the CSA.

The statistics showed that BME and older employees did less well in the test, but no one could say why.

The Home Office said that the Claimants had to identify the reason, otherwise, for example BME candidates who arrived late at the test assessment or left early could also claim they had been discriminated against.

The Supreme Court cut through the knot of that, and several other arguments, and stated, what is now the “equation” for deciding whether there has been indirect discrimination.

Indirect discrimination occurs when any provision, criterion or practice of the employer (its criterion) combines with a context factor to produce a disparity of outcome between people who have a protected characteristic and those who do not.

In other words: criterion + context factor = different outcome for people with/without a protected characteristic – that is indirect discrimination.

So, in the height example above, height would be a criterion. Then you add the context factor – women are on average shorter than men – that is the context in which the criterion operates. Do both combined lead to a different outcome based on a protected characteristic (in this case sex)?

Yes – both combined means if the employer says all applicants for employment must be at least 6 feet tall, many more men than women will qualify.

The Supreme Court said you must also ask whether the same context factor causes the individual disadvantage in each case.

So, the questions for a Tribunal are: –

  1. Is there a PCP;
  2. Is there a context factor;
  3. Do they combine to create a group disadvantage;
  4. Did the same context factor cause disadvantage to the claimant?

Is the answer to all four questions is “yes” the employer is guilty of indirect discrimination and has to try and justify the use of the PCP to escape liability.

Having explained the logic the Supreme Court held in Essop as follows:

  1. Is there a PCP – yes it was the CSA.
  2. Is there a context factor – yes, the expectation that BME individuals will do less well in the CSA.
  3. In this case did they combine to create a disadvantage to those with a Protected Characteristic – yes to BME individuals.
  4. Is the same context factor a cause of the individual disadvantage – this was a matter of fact for the Tribunal. For example, if an employee turned up half an hour late to the exam, the Tribunal may decide that that was the reason they failed the CSA exam, rather than the context factor

A cosy relationship or a contract?

By | Problem Solved

The Problem

I have been working on a large building site for the past 6 months as a contractor.  The site has been split into 5 phases, and I have almost finished phase 2, and have submitted my tender for the next 3 phases.

I have done a few small jobs on phase 3 which I have been paid for at my tendered rates.  I have spoken to the contracts manager about a written contract for the remainder of phase 3 and phases 4 and 5, and he replied:  “Just crack on with it”.  But I have my reservations about doing this without a contract or at least a letter of intent.

I have had no problem with payment in the past from this company, and don’t expect any problems in the future.  I would like some advice about how to tackle the situation, as I do not want to upset what has so far been a good working relationship, and where I stand health and safety wise working on a phase of the site that I have no contract for.

Thanks in advance for your help.

Malcolm

Michael’s Response

Hello Malcolm.  Although I understand that you do not wish to upset a good client that has, no doubt, provided a good source of income, it is vital that you ensure you have a written contract in place before you start your next phases.

What you are essentially doing when you record the agreement in writing with your client, is taking out insurance on the contract.  No matter how big or small a construction project may be, the majority of contracts, once signed, will be stored and never the see the light of day again.  However, when there is a dispute, the second thing that a company will do (the first being to instruct its lawyers!), is to open the bottom drawer of the filing cabinet and take out the contract that has been laying there since the start of the project.

Letter of Intent

As regards to the so-called letters of intent, I am definitely not a fan!  A true letter of intent only expresses a party’s intention to enter into a contract at a future date.  Yet the number of letters I have seen that are headed ‘Letter of Intent’, are in fact binding agreements.  I understand that on some projects, there is a need to start the works very quickly, meaning that a contractor needs to be appointed on at least the work that is at the early stages of the programme. Where this happens, a combined Early Engagement Letter and Letter of Intent can be drafted, which allows a contractor to commence part of the works under a contract, whilst waiting for the main works contract to be drafted out.

Health & Safety

Regarding health and safety, although no doubt this will form part of your written contract, there will still be strict requirements that you will need to observe, which are implemented by statute, for example the CDM Regulations 2015.  As an employer you will have duties that are also governed by statute, for example to provide adequate information, instruction, training and supervision to enable your operatives to carry out their work in a safe manner.  Even self-employed persons have duties under the law in relation to their own health and safety, to ensure their work does not put others at risk.

The UK’s Judges are just as guilty of overreach as those the European Court of Justice.

By | news

Author: John Cato, Solicitor-Advocate

I have just read some complete nonsense in one of our national newspapers that simply cannot remain unchallenged – even more so because it was written by Jeremy Warner, one of the country’s most distinguished Journalists, in The Daily Telegraph on the 25 August 2017.

He highlights his article with the comment: –

The UK’s Judges are just as guilty of overreach as those at the European Court of Justice.

He then proceeds through a series of non-sequiturs (and even those are only half baked) to the most astonishing conclusion: –

Judges have become much too powerful; they should be dethroned and made more democratically accountable.

The British Constitution (that “thing” which organises and distributes and regulates the power of the state) is “unwritten” in the UK; evolving over a long period of time into a stable democratic structure, referencing some documents – such as the famous Magna Carta – but more fixed in our minds than any legislative imprimatur.

You may remember from your days at school there are three pillars holding up this constitution: the legislature – Parliament (which makes the rules); the executive, which consists of the institutions and people promulgating and implementing those laws; and thirdly, the judiciary, who independently rule on the frictions created.

Considering human moral frailty, would it not be dangerous for the Judges to be beholden to any of the parties involved in the disputes which come before them – including the citizen?

In order to make the system function, there are, of course, various overlaps and checks and balances, but a judiciary, accountable to the people, in any more than a moral sense, which is what Mr Warner appears to be proposing, should not be one of them.

Allow me to propose a simple test: imagine the words “the Judges should be dethroned and made more democratically accountable…” came out of the mouth of Adolf Hitler.

That might give us pause for thought.

For example: would we want the judges to make sure their decisions steer clear of making them “enemies of the people” – as they were called by the Daily Mail after ruling against the government’s exercise of prerogative power to trigger Brexit?

Of course not: they must make their decisions in the public fora  and  subject to those pressures, but their ability to function independently must be carefully guarded, for our own safety’s sake.

A highly trained and powerful judiciary, with the freedom to say yes or no to any application before them, in accordance with their conscientious and diligent interpretation of the Constitution and Rule of Law we all subscribe to – together with them – is a central tenet of our free and liberal (I use the word non-politically) democracy.

Parts of the world where the Rule of Law does not hold good (regions of Northern Nigeria where Boko Haram rule the roost springs to mind) are always noticeable by the lack of an independent judiciary.

You only have to look out at the world for a few moments to know that if you cut down the power of independent judges, you and your family would not be able to stand up safely in the winds that would then blow.

Late Completion and Delay Damages

By | Problem Solved

The Problem

We entered into a contract to build 3 detached bungalows on the outskirts of Rugby.  The form of contract was not a usual standard form, but one that our client had drafted in-house, and it is fairly basic, which to be honest, suits us.

One of the terms that the contract did include was for a penalty if we failed to complete on time.  Unfortunately, we did not complete on time, and the client is now seeking a whopping £27,000 based on the 9 weeks that we were late completing.  Is there anything we can do?

Shaun

Response:

Ouch!  £27,000 is a big hit for your job to take.

Your problem relates to delay damages, and more specifically liquidated damages (e.g, the contract has set out a pre-determined periodic rate should you fail to complete on time).  I am therefore assuming that there is a valid liquidated damages clause in your contract and that there was a single date for completion.  I also assume that the rate for any delay caused to the date for completion as a result of contractor culpability was expressed as £3,000 per week (i.e. £3,000 x 9 weeks = £27,000).

Questions on delay damages have been quite frequent over the years, although since I last responded to a problem on liquidated damages (back in early 2013), the law has shifted, albeit because of a private parking charge case back in 2015, which my column touched upon in March 2016.

Prior to 2015, even where the parties had agreed in writing the rate of damages for delay, if challenged the employer must show that the liquidated damages rate was a genuine pre-estimate of the likely loss at the time they are fixed, otherwise the liquidated damages stated in the contract would not be enforceable (albeit the employer would not lose entitlement, but would then need to prove its losses).  This principle was established in the 1915 case of Dunlop Pneumatic Tyre Company Ltd. v New Garage and Motor Company Ltd.

Is a clause a penalty and enforceable?

In 2015, a dispute over a £85 private parking infringement notice went all the way to the Supreme Court.  The importance of this case however, was not the outcome, but the new test that the Supreme Court laid down for deciding if a clause is a penalty and thus unenforceable.  That new test was that the charge was neither “extravagant nor unconscionable”.

Until 2015 therefore, to successfully defend a challenge to a pre-determined loss, all the innocent party needed to show was that the sum was a genuine pre-estimate of the likely loss to be suffered at the time the sum was fixed.  Now, and providing that the innocent party has a legitimate interest in the sum claimed, the liquidated sum stipulated must not be extravagant or unconscionable when measured against those interests.  Quite what this means in practice is not yet clear and will no doubt be the subject of arguments in the future.

£3,000 per week for 3 bungalows, although high, I would say is probably seen as neither extravagant nor unconscionable.


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