Dispute Resolution analysis: The Court of Appeal has handed down a significant judgment concerning the duties owed by directors to their companies in and the application of the test pursuant to section 1157 of the Companies Act 2006. Harry Samuels, barrister, XXIV Old Buildings, considers the decision and its practical implications.

Dispute resolution analysis: The Court of Appeal dismissed an appeal from a Senior Courts Costs Office (SCCO) decision regarding the application of Tim Martin Interiors Ltd v Akin Gump LLP (‘Tim Martin’) to an assessment to be carried out under section 71(3) of the Solicitors Act 1974 (SA 1974). In February 2023, Costs Judge Brown sitting at the SCCO had allowed the application for assessment in the face of Thompson Snell & Passmore LLP’s (TS&P) suggestion that it would be a fruitless exercise should the tests in Tim Martin be applied. On appeal, the Court of Appeal compared a SA 1974, s 71(3) assessment to an assessment covered by SA 1974, s 71(1) and held that important distinctions applied. Written by Francis Kendall, director and costs lawyer at Kain Knight (City) Ltd.

Arbitration analysis: The Court of Appeal allowed only one out of three appeals and dismissed the remaining challenges to an investment treaty award that were brought pursuant to sections 67 and 68 of the Arbitration Act 1996 (AA 1996). The Court of Appeal set aside the award in favour of one of the parties because it concluded that the party in question did not qualify as an ‘investor’ under the relevant bilateral investment treaty (BIT). It also dismissed the respondents’ arguments that the challenges brought by the appellant were precluded by AA 1996, s 73, alternatively that they were not (with one exception) jurisdictional in nature within the meaning of AA 1996, s 31 so as to amount to legitimate grounds of challenge under AA 1996, s 67. Ultimately, however, the Court of Appeal dismissed all the appellant’s challenges. Written by Iain Sharp, partner, and Reema Shour, senior knowledge lawyer, at Hill Dickinson LLP.

Dispute Resolution analysis: The Court of Appeal has held that where a defendant (not having previously made a claim in the proceedings) brings a counterclaim against the claimant, which would have been statute barred when the original claim was commenced, then that counterclaim remains statute barred and is not ‘saved’ by the operation of section 35 of the Limitation Act 1980 (LA 1980).

Tax analysis: In Hotel La Tour Ltd, the Court of Appeal held that input VAT which a parent company had incurred in connection with the sale of shares in a subsidiary was irrecoverable. This widely awaited judgment reverses the decisions of the First-tier Tax Tribunal (FTT) and the Upper Tribunal (UT).

Tax analysis: In HMRC v Trigg, the Court of Appeal reversed the decision of the Upper Tribunal (UT) by holding that euro conversion clauses did not prevent the taxpayer’s sterling denominated bonds from being qualifying corporate bonds (QCBs).

Tax analysis: In HMRC v HFFX LLP, the Court of Appeal considered appeals by both HMRC and the individual members of a limited liability partnership (LLP) relating to discretionary deferred profit allocation/reallocation incentivisation arrangements. The Court of Appeal held that the discretionary reallocated payments to individual members of the LLP were taxable as miscellaneous income.

Tax analysis: In HMRC v Colchester Institute Corporation, the Court of Appeal decided that government funding Colchester Institute Corporation (CIC) received to provide free courses was third-party consideration for the supply of those courses. It found that the wording of the funding agreements and how the funding was calculated demonstrated that there was a direct link between the funding and the courses.

Tax analysis: In HMRC v MR Currell Limited, the Court of Appeal dismissed HMRC’s appeal that £800,000 contributed to an employee benefit trust (EBT) by a company, and immediately paid out to a director of the same company, was taxable as employment income. There were genuine loan arrangements, and the money did not represent diversion of earnings.

Tax analysis: The Court of Appeal has held that consumer redress payments made by ScottishPower in settlement of regulatory investigations were deductible for corporation tax purposes, overturning the decisions of both the First-tier Tax Tribunal (FTT) and Upper Tribunal (UT). On the facts, the Court held that these payments were not fines or penalty payments and therefore did not fall within the rule in McKnight (HM Inspector of Taxes) v Sheppard that fines and penalty payments are not deductible. The Court rejected the existence of a broader principle, in this context at least, that a payment should attract the tax treatment of a payment that it replaces. Consequently, even if the payments by ScottishPower were regarded as replacing fines or penalties, they would not automatically attract the same tax treatment as such fines or penalties which they replaced. Written by Richard Harvey, supervising associate at Simmons & Simmons LLP.

Private client analysis: The Court of Appeal held that the sale of loan assets from three insolvent Jersey trusts was void due to the improper exercise of a fiduciary power by the trustees. The judgment emphasises the importance of evidencing specific aspects of transactions to prove a bona fide purchaser defence and supports the view that the improper exercise of a fiduciary power is void in English law. It clarifies that the liability of a retiring trustee for their successor's breaches is based on the retiring trustee’s contemplation of its successor’s breach, and not the reason for the retirement This decision has significant implications for trustee duties, improper transactions, and third-party liability, affecting both Jersey and potentially English law trusts. Practical implications written by James Fennemore of XXIV Old Buildings.

Tax analysis: In GE Financial Investments, the Court of Appeal allowed HMRC’s appeal, holding that a UK incorporated company, which was stapled to a US company and so subject to worldwide taxation in the US was not entitled to double tax relief under the US/UK double tax treaty.