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The Times

Wednesday, October 12 2016

Frances Gibb and Jonathan Ames bring this morning’s must-read of all things legal, including news, comment and gossip.

Today

  • Huge fines loom for giving legal advice on tax avoidance
  • Melania Trump sues Daily Mail in London
  • Editors urged to lobby over defamation costs plan
  • Jail likely for ‘killer clown’ pranksters
  • Call for problem-solving courts green light
  • Law firm replaces Dragons’ Den investor
  • Comment: Big business needs stakeholder committees now
  • Blue Bag dairy: Duncan Smith labels Starmer ‘second rate’
  • More Blue Bag: Solicitors – reaching the parts that other lawyers don’t …
  • The Churn: Windy City rivals joust over banking lawyer in London

Tweet us @TimesLaw with your views.

 
Story of the Day

Huge fines loom for giving legal advice on tax avoidance

Lawyers could be hit with massive fines simply for advising on the legality of tax schemes under the Treasury’s beefed up anti-avoidance proposals, it was alleged yesterday.

A City of London law firm claimed that a planned crackdown by Revenue and Customs would put “many tax advisers in an impossible position”.

Tax lawyers fear that even merely advising on whether a client’s tax arrangements were legal would put the professional at risk of a fine if the taxman ultimately disagreed. On the other hand, refusing to advise clients would result in lawyers risking professional negligence claims.

The warning came on the eve of the end of HMRC’s consultation on strengthening tax avoidance sanctions and deterrents, which includes a range of proposed penalties such as fines of up to 100 per cent of tax avoided.

The consultation also proposes a naming-and-shaming regime for tax professionals, including lawyers, accountants and trustees, who enable clients to avoid tax using schemes that HMRC regards as “defeated”. HMRC is seeking increased and broad powers to define so-called legitimate tax planning in contrast to “unacceptable tax avoidance”. Many tax expert lawyers consider that the move will make application of the regulations far more subjective.

“The system HMRC is proposing would place advisers’ responsibilities to their clients in direct opposition to their responsibilities to the taxman,” said Adam Craggs, a partner and head of the tax disputes team at RPC, a City law firm.

Craggs said the proposed structure would “leave lawyers, accountants and other tax specialists stuck between a rock and a hard place. HMRC’s power to define what is tax avoidance and what isn’t means that it will effectively be judge, jury and executioner when it comes to punishing those in the tax profession.”

 
 
News Round Up
Melania Trump sues Daily Mail in London

Donald Trump’s wife has launched a defamation lawsuit in London against a Fleet Street newspaper, it emerged yesterday.

Melania Trump had filed an action against the Daily Mail in the US a few weeks ago, complaining that false statements had been published about her.

The Press Association reported yesterday that the Slovenian model had now filed a claim in the English court. In the US, she has brought proceedings in Maryland, naming the Daily Mail and a Maryland blogger as defendants. Court papers indicated that she was claiming at least $75,000 (more than £50,000) from each defendant.

The disputed article involved allegations that the wife of the US presidential candidate had worked as high-class escort and her immigration status in the country was questionable. Trump adamantly disputes the claims and the Daily Mail has published a retraction, with the editors saying they regretted any misinterpretation.

Papers filed at the High Court in London showed that Trump is making a defamation claim against the Daily Mail’s publisher, Associated Newspapers. So far no detail of her complaint – or indication of damages sought – has been revealed.

Mrs Trump has instructed Harbottle & Lewis, the London media law specialist firm, in the action.

Editors urged to lobby MPs over defamation costs plans

Plans to make media organisations pay the costs of losing claimants who sue them for defamation or privacy could irreparably harm the regional and local press, editors have warned.

Media organisations are being encouraged to lobby their MPs in an attempt to prevent section 40 of the Crime and Courts Act 2013 from being implemented.
Bob Satchwell, the executive director of the Society of Editors, has pointed out that when brought into effect that section will allow a court to order that a “relevant publisher”, which is not signed up to a press regulator recognised under the royal charter, must pay the claimant’s costs in a defamation or privacy claim, even if it wins the case.

“That could seriously damage or even close some papers,” the Press Association reported Satchwell as saying. “It is also totally unfair and undermines the first principle of justice.”

Satchwell said in his appeal to regional editors: “Ministers need to hear from local editors about the dangers of the possibility of having to pay the costs of legal actions even if you successfully defend cases. It could encourage more legal claims on issues that are usually settled by direct contact between editors and complainants.

“We fear that quick-thinking lawyers may well try to get in on the act and you may face costs in dealing with complaints whereas so far there have been none or only minimal financial effects.”

Jail likely for ‘killer clown’ pranksters

Police are likely to take a harsh approach to cracking down on the “killer clown” craze imported from the US, a leading criminal lawyer said yesterday.

So far (John Simpson reports), schools have been locked down, several arrests have been made and a teenager was left with a criminal record yesterday as a result of the fad involving pranksters chasing strangers while dressed as clowns.

The son of an England footballer was also reported to be facing expulsion from school for threatening to organise a gang of clowns to scare pupils at other schools, prompting lockdowns. The boy, whose father’s identity has not been revealed, has been suspended from school, according to The Sun.

“The reports so far demonstrate pretty antisocial behaviour and I would expect the police to take bad examples of it quite seriously, potentially arresting the perpetrators,” predicted Nigel Richardson, a partner at Hodge Jones & Allen, a London criminal law specialist firm.

Richardson said that those who dressed as clowns with the intention of purposely intimidating or distressing others easily fell within two sections of the Public Order Act. The legislation criminalises disorderly behaviour and covers the intention or likelihood of causing a person “harassment, alarm or distress”.

If convicted, offenders could face jail terms of up to six months as well as a fine.
“So far as dealing with people loitering in clown outfits but not actually doing anything, they could be threatened with arrest for behaviour likely to cause a breach of the peace ” said Richardson. “However, actual arrest could be deemed rather heavy-handed.”

Lobbying for problem-solving courts green light

Ministers face mounting pressure today to proceed with American-style problem-solving courts in which judges play an active role in sending offenders for treatment.

A coalition of former judges, academics and lawyers from a wide range of penal and rehabilitative organisations call on the lord chancellor to proceed with pilots as previously pledged.

The 36 signatories to the letter in The Times say that although problem-solving courts “are not silver bullets”, they have proved effective in cutting reoffending.
They include Lord Carlile, QC, Judge Michael Findlay Baker, Judge Nick Crichton and Malcolm Richardson, chairman of the Magistrates’ Association.

The most senior family judge in the UK, Sir James Munby, recently said that there must be “no pulling back” from plans to introduce a problem-solving approach.

The call coincides with the publication of a report today urging government backing for ten pilot projects across England and Wales as well as for existing drug and alcohol problem-solving courts. Judge Michael Findlay Baker, QC, a retired crown court judge and founder of the St Albans crown court project, called Choices and Consequences, said: “The benefits of these programmes and the lessons to be learnt from them should be more widely shared, particularly with those seeking to set up new problem-solving courts.”

The report from the Centre for Justice Innovation outlines a plan of action for extending the small network of present problem-solving courts. In American 20 states have adopted the approach.

The report says that despite support from senior judges and previously from ministers there has been “a lack of detailed plans for expected specialist court pilots announced by the government in May”.

Law firm replaces Dragons’ Den investor

Knights, the regional law firm that shot to fame when a Dragons’ Den star became a lead investor, has cut a fresh financing deal now that James Caan has cut ties with the practice.

The alternative business structure based in Staffordshire announced yesterday that it had secured funding from Permira Credit Solutions, a subsidiary of the debt management business.

Permira stepped in after it was revealed at the end of last month that Caan – who stared in the BBC television programme from 2007 to 2010 – had pulled the plug on his involvement with the firm. His London investment business, Hamilton Bradshaw, had supported Knights since 2012. During that time the practice grew its annual turnover from £8 million to £40 million.

Knights was the first English commercial law firm to be granted an ABS licence and attract private equity investment.

Thomas Kyriakoudis, the chief investment officer at Permira, said: “Knights exemplifies the type of successful business PDM [Permira Debt Managers] backs and we are delighted to become a finance partner to support the management team in their future growth and strategy.”

In Brief

RBS could face 'thousands' of global restructuring claims – Law Gazette

Shami Chakrabarti has ‘sold the final bit of her credibility’ in abstaining on snoopers’ charter – Huffington Post

'The odds are against them' – can CMS, Nabarro and Olswang pull off their daring tripartite merger? – Legal Week

Magic circle firm to force lawyers to hot-desk in London – The Lawyer

Correction

Edward Sparrow, the recently appointed chairman of the City of London Law Society, retains his partner status at the law firm Ashurst. In The Brief yesterday, we described him as a former partner. The chairman’s role at the society is part-time and not remunerated.

 
Byline
Comment

Big business needs stakeholder committees now Charlie Geffen

Corporate governance has suddenly shot up the Conservative Party’s agenda under the heading “the need for change”. But politicians and business leaders need to produce proposals that satisfy the politics – and also work in practice.

There is no need to amend the law on directors’ duties but to consider how the intent of the law might be more effectively enforced. The Companies Act already sets out the matters boards need to consider and the reality is that no court will interfere with bona fide commercial decisions in the absence of obviously bad behaviour.

The existing duty of directors to act in the best interests of their companies is not the same as acting in the best interests of the shareholders at any one moment. Shareholders always have the right to change the board or sell their shares.

One idea is for boards to establish stakeholder committees. This would help them to focus on the long-term interests of a company and resist pressure from some shareholders for short-term gains.

The committees could include representatives of shareholders, employees, pension funds, customers, suppliers and other relevant members of the community such as, for an energy company, environmentalists. Appointments would be proposed by boards and supported by shareholders.

The committees would have the right to be consulted on major board decisions but have no right of veto – so the role would be both to challenge boards and afford them cover to resist short-term shareholder demands and operate on a “comply or explain” basis. Its views on issues could, where appropriate, be made public.

Stakeholder committees would be a more effective mechanism to engage the wider community than simply having an employee director. In any event, a requirement for an employee director would bring an unwelcome constituency culture to board meetings.

All directors should be thinking only about the best interests of the whole company and not just the group that appointed them. The last thing business needs is more politics in the boardroom that would encourage parallel discussions outside of meetings.

It would be helpful also to see more research on what corporate culture is and what drives it. Tone from the top is important, and will support culture, but tone alone does not create it. Corporate culture is the outcome of its systems and management structure.

So do short-term financial or long-term non-financial spurs dominate? How do the incentive and bonus schemes work? What information flows around the senior management group and are the reporting lines clear with sufficient distinction between decisions for boards and decisions for shareholders?

In a private company, who really decides to borrow money to pay a dividend – the board or the shareholder?

There are many ideas being debated and there needs to be a solution that delivers a simple and clear message to politicians that business understands the debate. Stakeholder committees would go a long way to help.

Charlie Geffen is a partner and chairman of the corporate practice at the London office of Gibson Dunn & Crutcher; he also serves on a number of boards

 
 
Tweet of the Day

CMS, @Nabarro & @Olswang agree on three-way merger. Question: how much attrition will there be in lawyer headcount over the next 12 months?

dominic carman @CarmanDominic

 
 
Blue Bag

Duncan Smith labels Starmer ‘second rate’

There may be a lot of uncertainty in the aftermath of Brexit, but one thing is sure: Iain Duncan Smith, the arch Leaver and Conservative MP for Chingford and Woodford Green in suburban London, does not rate the legal skills of Keir Starmer, QC.

Starmer, the Labour MP for Holborn and St Pancras in inner London and former director of public prosecutions, was on his feet in the House of Commons on Monday in his new role as shadow spokesman on exiting the EU. He was jousting with David Davis, the secretary of state with that portfolio, when Duncan Smith intervened.

“May I congratulate my right honourable friend on his statement,” the former Tory party leader said to Davis, “and urge him to resist the temptation of advice from a second-rate lawyer who does not even understand the parliamentary process?

“If he is to advise his opposite number, the honourable and learned member for Holborn and St Pancras, he might remind him that the repeal of the European Communities Act 1972 will give many opportunities to amend and debate every single aspect of the discussions around the invoking of Article 50.”

Solicitors – reaching the parts that other lawyers don’t …

Advertising campaigns promoting to ordinary punters the joys of instructing solicitors emerge from the hallowed halls of the Law Society in Chancery Lane every couple of years or so – and the latest is about to appear on a hoarding near you.

In 2010 the society, which is the quasi-trade union for solicitors in England and Wales, coughed up about £200,000 for a series of relatively low-tech adverts. Three years later, the organisation beefed up the budget by about 50 per cent and ended up with a poster campaign pitched at personal injury victims, urging them: “Don’t get mugged by an insurer.”

A year later, the chiefs at Chancery Lane chucked more cash at the denizens of Charlotte Street, taking the budget to £400,000. This time they got several posters that featured what appeared to be clip-art with simple messages about employment and family law. One of them was in Welsh, so presumably a chunky slice of the budget went on translation fees.

Now the society is going with the multicultural look. Earlier this week it unveiled a campaign that pictures the wide range of the ordinary folk of England and Wales with the catchline: “Solicitors. Here to help.”

And in the true spirit of advertising hype, a spokesman for the organisation told The Brief that this campaign would be bigger and better (and probably cleaner and brighter) than ever. In addition to last-century media such as advertising hoardings, the latest campaign will appear on social media, other “online platforms” and on the ITV Hub, which the spokesman helpfully explained is “very popular with young people”.

On past experience, this whizz-bang-wallop multimedia assault should take the budget well beyond the half-million-nicker mark. But so far the society has not revealed the cost to solicitors, claiming that this time the budget is “commercially sensitive”.

Robert Bourns, the society’s president, attempted to reassure solicitors that however much was spent, it would not have been wasted. “We spoke to solicitors, the public and businesses to help us develop the campaign through research, surveys and workshops,” Bourns told The Brief. “As a result we are promoting solicitors as experts in their field, client focused, delivering value for money, honest and honourable, approachable and accessible and making a positive contribution to society.”

Pinpointing London’s media law map

To liven up its recent media law conference, 5RB, the Gray’s Inn chambers that is one of London’s specialist media litigation sets, had a raffle for a bottle of champers.

Instead of the usual draw of business cards from a pint pot, the chambers conducted a competition in which participants had to identify on a panoramic photograph of London town the geographical position of various law firms and media businesses. Harder than it looks as most are in the City. Moreover, could you pinpoint Bates Wells Braithwaite, or the Practical Law Company or Squire Patton Boggs by peering at a grainy black and white image?

But more interestingly, despite having invited the great and good of London media luvvies, understandably including 15 prominent media law firms, the chambers only included two of those firms on its geographical location challenge.

Who were the lucky two seen as sufficiently important to merit inclusion? Addleshaw Goddard and RPC, which the chambers still identified as Reynolds Porter Chamberlain. Ironic, considering 5RB no longer refers to itself as 5 Raymond Buildings.

 
 
The Churn

A run down of the big partner and team moves this week

Windy City rivals joust over banking lawyer in London

It has been a mixed few days for the London office of Kirkland & Ellis, the Chicago-based law firm. First it emerged that thanks to an earlier decision to peg its Square Mile salaries to the dollar, it had leapt far above all City rivals in the pay league table.

Then we learnt that there was indeed a price to pay for the shower of cash – young lawyers at Kirkland had the longest working hours of any of the big law firms in the City.

And now the office has waved goodbye to a leading partner. Jifree Cader has bailed out and headed for Chi-town rival Sidley Austin, where he joins the corporate restructuring and banking team.

Also in the City, Carly Caton has jumped from Pinsent Masons to the partnership at Bevan Brittan. She joins the firm’s health law practice.

And while CMS was busy tying the knot on a huge tripartite merger with fellow London law firms Nabarro and Olswang, it may well have taken its eye off the ball in Ukraine. Olga Vorozhbyt has left the firm’s Kiev office to join the local office of DLA Piper, the transatlantic practice. She joins as a partner and will head the firm’s local litigation and regulatory department.

 
 
Closing Statement

From fiction to fact

The most unusual dramas are played out in courtrooms, muses Gary Slapper, so it is not surprising that one case began as fiction ended up as fact.

In 1967, BBC TV broadcast a drama about the fictional case Board of Inland Revenue v Haddock – “the case of the negotiable cow”. Angry at the way he had been treated by the tax authorities, Albert Haddock – a character invented by AP Herbert, the writer, MP and law reform campaigner, in 1924 – tried to settle his tax by writing a £57 cheque on the side of a cow and leading the animal to the office of the Collector of Taxes.

A few weeks after the programme, a US newspaper, the Memphis Press-Scimitar, published an article headlined “A check can be written on a cow”. Without reference to the BBC or Herbert’s story, the article recited the case as a real precedent from “19th-century English law”. The case was later referred to in American legal writing.

In court, Albert Haddock argued that cheques written on napkins and wine labels had been successfully drawn on banks. So, he said, his instructions to his bank stencilled in red on the side of a white cow were legal.

He won his case having argued that there were in his account “sufficient funds to meet the cow” and that if the tax collectors didn’t like it they could “do the other thing”.

Gary Slapper is global professor at New York University, and director of its London campus; twitter @garyslapper