Friday, 17 February 2017

No-win, no-fee and business rates

Very quick blog for the benefit of David Gauke, MP who happens to be chief secretary to the Treasury.

He is introducing business rate changes that will see rates rise for just over half a million businesses from April. He is facing a barrage of criticism from various directions. I instinctively feel that business is quite heavily taxed at the moment and increasing the tax burden on small businesses at such an uncertain time is a terrible idea. But, I also recognise that I don’t really know much beyond what happens in my own business so I won’t try to argue whether the rate changes are a good or bad thing
What I do want to discuss is his comments about steps being taken to clamp down on people bringing challenges to the rates they are asked to pay in the hope of reducing the cost to their business. 

Mr Gauke seems to place the blame for too many challenges at the door of the surveyors and lawyers (aren’t we always to blame… well until you need us) encouraging businesses to proceed on a no-win, no-fee basis. He said this: 

“Nobody is going to be stopped from appealing… We have to recognise what is currently happening in the system is that there are a huge number of very speculative appeals that are going in, first encouraged by agencies on a no-win no-fee basis, chancing their arm hoping that there will be a reduction in their business rates.

 “That is frankly clogging up the system and getting in the way of appeals for those who have a genuine problem, where maybe there has been a mistake or an error, and that process is much slower than it should be.”

Since Mr Gauke is being frank, I hope he won’t mind if I am too. For somebody whose job is so integral to business in the UK, it is a pity Mr Gauke has not taken a moment to think about how no-win, no-fee claims work. If he had I do not see how he could have made that statement with a straight face. To be even franker I don’t see how he could have looked at that statement and thought, “that makes sense” on the face of the words themselves. 

As the name implies, no-win, no-fee means that if you don’t win your case your lawyer or surveyor doesn’t get paid. In civil courts, solicitors are entitled to claim an enhanced fee when undertaking these cases. I don’t know whether that is the case in rate challenge cases, but after looking at a few firm’s websites I see most take a portion of the savings they bring in, which is effectively no-win, no-fee. 

Because the solicitor does not get paid if he loses the case there is no incentive for him to agree to a no-win, no-fee arrangement in “speculative appeals” since, if it is a case with no real merit then that is a recipe for losing. And, in case Mr Gauke isn’t keeping up, if the case is lost the lawyer has undertaken all the work involved without being paid. That’s fine if you expect to win more than you lose, but if you are deliberately proceeding on speculative cases that you know are likely to be lost then you will lose more than you win.

Losing more than you win, or to put it another way, working for free most of the time, is a terrible business model and one that is likely to lead very quickly to bankruptcy. While it has always been said that great lawyers make terrible business people, even the worst businessman should realise that spending the majority of your time working for free will not keep you in business long. 

I don’t deny that speculative cases are brought. But, I’d suggest there are reasons other than lawyers encouraging clients to proceed simply to line their own pockets. 

I also don’t deny that no-win, no-fee arrangements exist but, I do suggest that any sensible businessman would not repeatedly enter into them knowing they are going to lose over and over again. As I’ve said, most of the firms I’ve seen charge based on the savings they make for the business – no saving equals no income, which means unpaid bills every time they lose.

You might consider that people are engaging lawyers and surveyors or bringing “speculative appeals” themselves because the impact of taxation across their business is very high and they are very desperate to minimise it if at all possible. But, like I said, I’m no expert on taxation so I’ll let you make up your own mind.

Friday, 3 February 2017

Has Paul Nuttall of UKIP broken election law?

Nuttall criticised for his living arrangements but not for that awful outfit
Over the past few days, UKIP leader and Swindon by-election candidate, Paul Nuttall has faced criticism for giving his home address, on the Home Address form that is part of the nomination pack for prospective political candidate, as one where he does not live. Mr Nuttall answers these criticisms by saying that he gave the address because he has rented the house and intends to move into it for the duration of the election campaign.

Journalists, most notably Michael Crick, have been forthright in their claims that Mr Nuttall broke the law and could face prison for making a false declaration. So, what is the truth?

Michael Crick on Paul Nuttall
Prospective candidates must register their nomination with the returning officer by providing certain information. The required information is set out in paragraph 6 of schedule 1 to the Representation of the People Act 1983. All of the required information can be easily provided by downloading and completing a nomination pack from the Electoral Commission website. For our purposes, the relevant information is required by paragraph 6(4) of schedule 1 to the 1983 Act and is provided by way of form 1b – Home Address Form in the nomination pack. The form asks for “Home address (in full)” and in a separate box for “Postcode”.

The Electoral Commission has produced guidance for completing the nomination pack. In so far as the Home Address Form is concerned its guidance can be distilled into, “write down your home address”.

I cannot find any cases citing para 6(4) – in fact the first time para 6 seems to have been referred to in any case was 2015 when a returning officer refused to allow two people who wanted to job-share the role of MP to stand as a single candidate. This means that a court has never had to rule on the definition of a home address. I think this is important because, in the absence of any guidance, I would argue that home address can obviously mean where you live this minute but could also mean an address that you have acquired and plan to use imminently. The question is how you interpret the law. If you take a strict approach then a candidate must give the address at which he or she lives at the time the Home Address Form is completed. But that leads to bizarre results. Let’s imagine I plan to stand. I’ve lived in my house for 10 years but will be moving next week and will no longer have access to my home of 10 years. If a court were to take a strict approach then I must enter my current address, which will be available for the public to see despite my having left that address by the time of the election. That is an anomaly I cannot imagine Parliament intended to create.

But, if we take a purposive approach we may well conclude that since I will be living at my new address within a week and that is where I will be should anybody wish to contact me about my candidacy that I should enter my new address since that is the address that will be relevant to any voters or journalists wishing to find me.

Lay people often imagine that the law is a fixed, almost tangible, thing that any lawyer worth his fee can define in a few words. The truth though is that law is about assessing meaning, thinking through the consequences of different meanings and applying the meaning that works best. After that’s been done once it can become a precedent – a law if you like – to be followed in future.

I would suggest that Parliament’s purpose in requiring candidates to provide their address was not to freeze a moment in time for posterity but to provide a ready means for the public, journalists and, most importantly, the returning officer to find that candidate. If that is the case then Mr Nuttall will have complied with the law, assuming he actually intends to move into the house as he promised.

We’ve started, so let’s finish this thing and put ourselves in the position of a prosecutor weighing up whether to prosecute or not. We are going to take a strict approach and decide that Mr Nuttall has given the wrong address on the Home Address Form – what now?

Being a good prosecutor, we will have noticed that section 15 of the Electoral Administration Act 2006 created the crime of supplying false information and inserted that crime in the 1983 Act as section 13D, subsection 1 of which tells us that:

“A person who for any purpose connected with the registration of electors provides to a registration officer any false information is guilty of an offence.”

There is a defence to the charge afforded by subsection 4, where a person did not know and had no reason to suspect that the information was false. You might well argue that if Mr Nuttall genuinely intended to live at his Stoke address that he may well not have realised that the information he was providing was false for the purposes of the Act. I’ll let you make your own minds up about that.

Section 13D(6) tells us that a person who is guilty of an offence shall be liable to imprisonment for up to 51 weeks (although I am not certain if 51 weeks is in force since a. that would exceed the magistrates maximum sentencing powers; and b. I cannot locate a copy of the SI bringing the relevant amendment into force as is down) and an unlimited fine.

So now, sitting with our prosecutor’s hat on, we must decide whether such an offence should be prosecuted. We have the Code for Crown Prosecutors to guide us as well as specific guidance for the offence of supplying false information.

The guidance tells us that the purpose of the Acts governing elections “… is to maintain the integrity and probity of the electoral process. Proceedings for major infringements will normally be in the public interest.” It goes on to tell us that an offence of a technical nature that does not infringe the spirit of the legislation can be dealt with by way of a police caution or even advice as to an individual’s future conduct.

Keeping ourselves in the position of a prosecutor, I would suggest that giving an address you intend to move into but have yet to do may well not be false information at all if that new address is the appropriate one for you to enter on a purposive approach to the interpretation of the 1983 Act. The decision is not mine though – you decide. Do you think that Parliament intended to criminalise the giving of an address you already own a lease on, a home in which the candidate is about to move to and which they will be living in during the election? I suggest that is not what Parliament intended, but, if you are not with me on that then I invite you to consider whether such a candidate would realise that the information they were giving was false for the purposes of the Act? If you think that he wouldn’t realise that then he is not guilty of an offence and should not be prosecuted.

If you decide that, on the face of it, an offence may well have been committed then we need to consider whether prosecution, caution or advice is the best way of dealing with this – of course a caution can only be administered if the candidate makes a full and frank admission to wrongdoing.

I would suggest that this is a technical breach of the law and is not one likely to have any influence on the outcome of the election whatsoever. In that case, should criminal proceedings be brought or should advice be offered? You’re the prosecutor charged with making a decision – you decide.