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Human trafficking survivors settle claims after successful freezing injunction application

by James Robottom and Rose Harvey-Sullivan, 7 Bedford Row

ATLEU has recently settled High Court claims on behalf of two survivors of trafficking following a successful application for a freezing injunction over the defendant and third-party companies’ assets. The case demonstrates how freezing injunctions can be used to secure compensation for victims where defendants are likely to or have dissipated their assets to avoid liability.

Background

The claimants, Mr Magyar and Mr Toth, both Hungarian nationals, were victims of a large scale conspiracy to traffic human beings from Hungary to the UK for the purposes of forced labour in 2011 – 2013. The majority of victims of that conspiracy were forced to work in a mattress factory called Kozeesleep – see AK v Hick Lane Bedding [2020] EWHC 3288 (QB). However, both claimants were put to work in smaller businesses including metalpowdercoating.co.uk (MPC), a business in Batley, West Yorkshire.

They were forced by their traffickers to work at the factory for little pay, housed in appalling conditions, harassed and threatened. They alleged that staff and management at the factory were aware of their situation and paid their traffickers directly in order to profit from cheap labour. In 2014 the Hungarian traffickers were convicted of human trafficking offences, and in 2016 the managing director of the mattress company was also convicted of conspiracy to traffic human beings.

The claimants brought High Court claims for psychiatric injury, breach of contract, and intentional torts including harassment and unlawful means conspiracy against the Defendant, metalpowdercoating.co.uk. When proceedings were issued in 2018, MPC was a solvent company with substantial assets. However, it later became clear from Companies House documents that the company’s assets were diminishing. By 2020, MPC was balance sheet insolvent. Following investigations and pro bono assistance from Simmons & Simmons LLP, ATLEU was able to demonstrate that, following issue of the claims, the directors of MPC had set up other companies which operated from the same premises as MPC which carried out the same work. MPC had sold property to these companies, several of which now had substantial assets, while MPC had none. The other companies, however, were not parties to the claim.

At the same time it became apparent that the sole Managing Director of MPC, Mohamedali Foolat, had been prosecuted by the CPS for human trafficking offences in relation the claimants in 2015, but the matter had been dropped on a legal technicality. Further, just 12 days after service of proceedings on MPC in 2018, he had transferred ownership of his private home to family members.

With a trial in the first claim only six weeks away, the claimants applied ex parte for a freezing injunction and to add Foolat as a defendant.  To obtain a freezing order the applicants had to establish:

  1. A good arguable case
  2. The existence of assets belonging to the Respondent
  3. A real risk that the respondent will dissipate his assets if the order is not given
  4. That the order is just and convenient.
The freezing injunction

At an urgent without notice hearing on 5 March 2021, Mr Justice Johnson granted a freezing order up to a value of £500,000 against MPC, Foolat personally, and all other companies managed by Foolat (seven respondents in total). There were several features of the application which will be of particular note to practitioners:

  • It was made close to trial
  • The application was brought by legally aided claimants
  • The court accepted that it was appropriate to make the order against the non-defendant companies. Although the claimants’ causes of action were against MPC, only the injunction was granted ancillary to and in support of that claim. A freezing injunction may be made against a third party where the relevant assets may be reached by one legal route or another for the purposes of satisfying judgment. In Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 the High Court of Australia held that in order for a freezing injunction against a non-party, against whom there is no cause of action to be granted, it was not necessary to show that the non-party held assets to which the defendant was entitled. The High Court held [405-406] that such an order may be appropriate where:

(i) the third party holds, is using, or has exercised or is exercising a power of disposition over, or is otherwise in possession of, assets, including ‘claims and expectancies’, of the judgment debtor or potential judgment debtor; or
(ii) some process, ultimately enforceable by the courts, is or may be available to the judgment creditor as a consequence of a judgment against the actual or potential judgment debtor, pursuant to which, whether by appointment of a liquidator, trustee in bankruptcy, receiver or otherwise, the third party may be obliged to disgorge property or otherwise contribute to the funds or property of the judgment debtor to help satisfy the judgment against the judgment debtor.

The claimants argued that Foolat and the other companies were likely to be judgment debtors in due course. Where assets have been moved out of a company for the purposes of avoiding having to pay creditors, those assets can be pursued for the purposes of satisfying the judgment. Further, section 423 of the Insolvency Act allows the court to set aside a transaction entered into at an undervalue (for instance, selling a property to your own company at a price below market value) in order to defraud a person making a claim against him or her.

Indeed, if the third-party companies or their directors had been found to have conducted themselves in this way, they could have committed the criminal offence of Fraudulent Trading under s993 Companies Act 2006. That offence is made out where any business or company is carried on with intent to defraud creditors of the company or creditors of any other person, or for any fraudulent purpose.

  • Unusually, the Court did not require the applicants to give an undertaking in damages. The applicants successfully argued that the court has a discretion not to require the standard undertaking and as impecunious trafficking victims, they should not be prevented from the benefit of a freezing injunction by reason of their inability to pay damages. See Gould v Kay [2020] 7 W.L.U.K. 22 and Allen v Jambo [1980] 1 W.L.R. 1252, where Lord Denning MR stated:

    “I do not see why a poor plaintiff should be denied a Mareva injunction just because he is poor, whereas a rich plaintiff would get it.”

After the freezing injunction was granted, but prior to the hearing of the claimants’ application to add Foolat as a defendant, the claimants were able to negotiate a favourable settlement with the defendant. That included up-front cash payments of money which the defendant had previously maintained it did not have and did not have access to. It also included security for the claimants’ costs in the form of charging orders on properties owned by the third-party companies.

Wider implications

The Explanatory Report to the Council of European Convention on Action against Trafficking Human Beings states in relation to Article 15, the right to compensation and legal redress, that:

Even though it is the trafficker who is liable to compensate the victim, by order of a civil court or –in some countries –a criminal court, or under a judicial or extrajudicial transaction between the victim and the trafficker, in practice there is rarely full compensation whether because the trafficker has not been found, has disappeared or has declared himself bankrupt. [§197]

These cases demonstrate the potential for using freezing injunctions and applying the powers of the High Court to secure compensation for survivors where defendants and traffickers have dissipated assets in order to avoid paying compensation. They are a powerful tool in the armoury of lawyers seeking redress and vindication for victims.

ATLEU instructed James Robottom and Rose Harvey-Sullivan from 7 Bedford Row in this case.


Diplomatic immunity for trafficking claims quashed

by Nusrat Uddin, Wilson Solicitors LLP

An exploited domestic servant, JW, brought a claim against her Saudi diplomat employer. She worked for over 16 hours a day, for months, without any breaks or days off, and was unable to leave the diplomat’s residence. Her promised wages were also withheld.

The diplomat asserted that his diplomatic status protected him from any civil claims and asked the court to strike out the claim. The Employment Tribunal held that the current Saudi diplomat is not immune from the civil jurisdiction in relation to claims of human trafficking and modern slavery.

The judge interpreted an exception to diplomatic immunity in a way that it applied to the trafficking and employment of a domestic servant in conditions of modern slavery. Observing that ‘it would be difficult for a court to forsake what it perceived as a legally respectable solution’, so the judge refused to strike out the case.

The judgment is groundbreaking because it holds that a current diplomat is not immune in relation to claims of human trafficking and modern slavery. In October 2017, the UK Supreme Court in Reyes v Al-Malki had held that a former diplomat was not immune in those circumstances, but whether a current diplomat still enjoyed immunity was unclear. This judgement transforms the dicta of the Supreme Court into a ratio that can be applied in other cases, advancing the commitment of the international community, and the UK in particular, to end modern slavery.

The diplomat has indicated that he will be appealing the decision and so it is likely that the case may again be appealed as far as the Supreme Court, just as the Reyes v Al-Malki case was. However, we are extremely pleased with the judgement at this stage which has far reaching implications for victims of trafficking and modern slavery who are ill-treated by their diplomat employers. These claims ensure that victims are able to assert their rights in the face of such exploitation. We hope that this judgement acts as a deterrent against abuse from such employers going forward.

JW instructed Wilsons Solicitors LLP and was represented by Philippa Webb of Twenty Essex Chambers.

More information can be found on the Wilsons LLP website.

Nusrat Uddin is a solicitor in the Public Law team at Wilson Solicitors LLP. She works with vulnerable and disadvantaged clients who have been failed by state authorities with a particular focus on improving state support for victims of trafficking and modern slavery.


Increase in compensation in discrimination claims

Discrimination claims are a vital part of compensation for victims of modern slavery and human trafficking. Victims have gained substantial compensation from their traffickers by way of discrimination claims in the Employment Tribunal. Injury to feelings is one of the most important components of these discrimination claims.

Since the 2002 case of Vento v Chief Constable of West Yorkshire Police [2003] IRLR 102 compensation for injury for feelings has been divided into three ‘bands’:

  • The lower band applies to ‘less serious cases where the act of discrimination is an isolated or one off occurrence’
  • The middle band ‘should be used for serious cases which do not merit an award in the highest band’
  • The top band is appropriate for ‘the most serious cases such as where there has been a lengthy campaign of discriminatory harassment’.

Only in ‘the most exceptional cases’ will awards be higher than the top band.

The guidelines have now been increased for all claims presented to the tribunal after 6 April 2019. The new bands are:

  • Lower band £900 to £8,800
  • Middle band £8,800 to £26,300
  • Upper band £26,300 to £44,000.

These guidelines are found in the Presidential Guidance, 25 March 2019.

It is worth bearing in mind that although Vento refers to the seriousness of the conduct to determine the correct band, it is the effect on the individual and not the seriousness of the treatment which determines the level of compensation. Nevertheless, it will be considerably easier to establish the seriousness of the impact of the individual in cases of serious conduct – and vice versa.

If a victim has suffered from injury to their health, they can also recover compensation for personal injury in the tribunal in addition to compensation for injury to feelings. In contrast to the Vento bands, compensation for personal injury is usually calculated according to the 14th Edition of the Judicial College Guidelines for Psychiatric Damage.

Compensation for injury to feelings and personal injury is also now subject to a 10% uplift following Simmons v Castle [2012] 1ALL ER 334. There is no cap on discrimination damages.

This new increase underlines the effectiveness of discrimination complaints in compensating victims. Victims may also be entitled to compensation for aggravated damages, exemplary damages and interest.
When a failure to pay the National Minimum Wage over more than two years can be established as an act of discrimination, then damages for failure to pay the National Minimum Wage may be recovered for more than the two-year current limitation imposed by the Deductions from Wages (Limitation) Regulations 2014. See for instance Ale v Chugani and others.

More on compensation and discrimination claims in the Employment Tribunal


Au pairs and the barriers to fair pay by Rosie Cox

Recent research on au pairs in the UK has found that during the last 10 years, au pairing has changed dramatically. There is no longer a clear divide between the work done by au pairs and work that qualified nannies and full-time professional housekeepers would have done in the past. Au pairs are now open to exploitation by working long hours for low pay because government guidance is so scant and vague.

In 2008, the UK au pair visa was ended and with it went government regulation of au pairing. Current government guidance  allows for people in vastly different situations to be classified as au pairs. In the UK, an au pair can work any number of hours per week, be involved in any kind of activity and does not even need to live in their ‘host’s’ home. In fact, the only thing that the guidance is definitive about is that au pairs are not workers and they are not entitled to NMW and paid holidays.

Analysis of 1000 advertisements for au pairs posted on Gumtree.com revealed that au pairs were being offered posts that not only included full-time, demanding work within hosts’ homes, but that some ‘hosts’ also wanted ‘au pairs’ to work in their businesses and shops.

Despite many au pair roles being indistinguishable from domestic ‘work’, au pairs who might want to claim NMW face two barriers. The first is proving that they are workers employers found that “unless you state that you are hitting them [live-in domestic workers], the helpline is unlikely to tell you that you need to pay them minimum rather than au pairs, something that the vague and capacious guidance on au pairing makes very difficult. Second, if they live-in, they are then likely to be subject to the ‘family worker’ exemption from NMW. This rule has been written in such a way that researchers who called the government’s pay and work rights helpline posing as wage,”*.

A clear definition of au pairing is urgently needed in the UK. This should create a limited, part-time role for au pairs who are primarily engaged in language learning and cultural exchange and a separate role for domestic workers, unhindered by reference to family membership. Both should be rewarded with fair pay and conditions.

For more on the situation of au pairs in contemporary Britain, see As An Equal: Au Pairing in the Twenty-First Century by Rosie Cox and Nicky Busch.

Rosie Cox is Professor of Geography at Birkbeck, University of London. She has been researching paid domestic work and au pairing in the UK for over 20 years.

*Moss, Jenny. (2015). Migrant domestic workers, the National Minimum Wage and ‘family worker’ concept.  In Cox, R (Ed) Au Pairs’ Lives in Global Context: Sisters or Servants. Palgrave pp70-83


Extending time for minimum wage claims by Anna Beale

In 2015, a two year limit was placed on claims for unauthorised deductions from wages in the employment tribunal. As many victims of trafficking are paid nothing, or almost nothing, over many years, recovery of (at best) two years’ back pay will not fully reflect their loss. As an alternative, a claim can be brought in the civil courts for breach of the implied contractual term requiring payment of the minimum wage. A six year limitation period applies to such claims but of course many wage claims by victims of trafficking extend back still further.

Section 32(1)(b) of the Limitation Act 1980 provides a possible means of extending this six year limit. Where the Defendant has deliberately concealed from the Claimant any fact relevant to her right of action, the six years will not begin until the claimant has discovered that fact, or could reasonably have discovered it. Under section 32(2), such deliberate concealment is expressly stated to include a situation where a Defendant deliberately commits a breach of duty in circumstances where it is unlikely to be discovered for some time.

These provisions were successfully deployed in the recent case of A* [2017] EWHC 3098. A was a domestic worker for the Defendants for almost 10 years. As in many trafficking cases, when A was brought to the UK she and was unable to read or write in English. The Defendants made A sign documents that they sent annually to the Home Office, which stated that she was paid for her work in line with the national minimum wage.

The Court found that the Defendants had deliberately withheld from A the fact that they were representing to the Home Office that they were complying with UK employment laws, when they were not. The Court also found that the Defendants knew they were obliged to pay A the national minimum wage, and therefore that they fell within the provisions of section 32(1)(b) and (2). Time only started to run when A had learned enough English to read the documents she was signing, and so her whole claim was in time.

These circumstances may apply in many trafficking cases where there is a long period of employment. The availability of this extension should always be a factor in considering the best forum for such claims.

By Anna Beale
Barrister, Cloisters

*The case is anonymised in accordance with a court order pending determination of the Defendants’ application for a permanent anonymity order.

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