Legal Watch: Property Risks & Coverage June 2014 Issue 006
Introduction Thanks this month go to Nathan Rehbock for his article on Co-
In This Issue:
operative Group Ltd v Birse Developments Ltd & Ors. The post Mitchell debate continues and once again, we could fill an entire issue with cases on relief from sanctions. Instead
• Welcome new colleagues • Re-amendment of claim not permitted
we have provided a brief post Mitchell update and featured
• A brief post Mitchell update
one particularly interesting case, Gordon v Fraser (No.1),
• Relief from sanctions – late service of witness
where relief was granted in respect of witness evidence on the first morning of the trial. We also look at the landmark Court of Appeal decision on consequential losses under the Riot (Damages) Act 1886 (see Mitsui Sumitomo Insurance Co (Europe) Ltd & 5 Ors v Mayor’s
evidence • Consequential losses can be recovered under the Riot (Damages) Act 1886 • Landowner’s duty where her tree fell onto railway line
Office for Policing & Crime below) and the case of Stagecoach South Western Trains Ltd v Kathleen Hind & Andrew Steel which looks at the duty owed by a neighbouring landowner in respect of a tree that fell onto a railway line.
Contact Us If you would like any further information on the cases or articles featured in this issue, please contact: Nathan Rehbock T: 0207 469 6242 E: njr@greenwoods-solicitors.com Marise Gellert T: 0207 469 6249 E: msg@greenwoods-solicitors.com
Welcome new colleagues Daniel Carter Dan comes to Greenwoods’ Property Risks & Coverage Group with substantial experience of subrogated recoveries, having acted for some of the country’s biggest household insurers across all perils but with particular experience of complex litigation claims involving fire and subsidence. He has dealt with parties ranging from sole traders to international companies and councils throughout the country. Lori McConnachie Lori began her legal career in 2005 as a paralegal in a national insurance litigation firm, where she went on to undertake her professional training. She qualified as a solicitor in 2012. Lori has experience in defending property damage claims, advising on coverage issues and pursuing subrogated recoveries on behalf of insurers. She has a particular interest in disputes arising in the construction industry.
Re-amendment of claim not permitted In the case of Co-Operative Group Ltd V (1) Birse
floors was substantially less than required and the floors
Devlopments Ltd (In Liquidation) (2) Stuarts Industrial
were in danger of collapse. As a result, A replaced the floors
Flooring Ltd (In Administration) (3) Jubb & Partners (A Firm)
at a cost of £2.5 million. A’s earlier application to amend its
[2014] EWCA Civ 707 the appellant company (A) appealed
claim to include an allegation of reduced steel fibre content
against a refusal to permit re-amendment of its claim against
was refused because it introduced a new cause of action.
the respondent company (R) for damages for breach of contract concerning allegedly defective concrete floors in its warehousing facility.
“...it was not fair, reasonable or accurate to characterise the new case as arising out of substantially the same facts as already had been pleaded.” The Court of Appeal held that the circuit judge had been correct to refuse the re-amendment of the claim where it was not fair, reasonable or accurate to characterise the new case as arising out of substantially the same facts as already had been pleaded.
The proposed new breach of contract claim contained a summary of “the basis for [A’s] complaint that the slab was insufficiently thick in places”. The only complaint of that nature was that the slab was “below the design thickness of 150mm, being only 112mm thick in places”. It was common ground that the specification contained neither an explicit requirement that the concrete slab be of 150mm thickness, whether with or without tolerance, nor any reference to design thickness as such. However, a clause in the contract called for the ground floor concrete slab to reliably deliver a pallet racking leg load of 70kN/leg and that would only be met on the basis that the floor met the design intent of 150mm thickness (less tolerance). The crux of the complaint was thus that the thickness of the floors was insufficient to meet the loading requirements specified in the clause. The trial judge did not consider that the proposed reamended particulars of claim sought to add a new cause of action but he declined to permit the amendment on discretionary case management grounds.
The appeal
Facts
R contended that:
A contracted with R to design and build two large
1. The trial judge’s exercise of his discretion should be
warehouses and an office block at A’s distribution centre.
upheld but in any event the proposed re-amendment
Two years after completion A issued a claim for breach of
was impermissible because it sought to rely on a new
contract, asserting that the internal concrete floors were
cause of action not arising out of substantially the same
defective and that the floors did not meet the required
facts as were already in issue for the purposes of the
standards set out in the contract because they were below
Limitation Act 1980 s.35 and CPR r.17.4(2); and
the required thickness and were suffering from heave. The
2. The “new claim” which A sought to rely on was
cost of repairing the defects was estimated to be £381,000.
substantially the same as that the Court of Appeal had
A later discovered that the steel fibre content of the concrete
already held to be a “new claim” falling outside the
category of those which could be added after expiry of the limitation period. The Court of Appeal held that all that was in substance new or different about the second proposed re-amendment was the assertion, contrary to the case previously advanced and contrary to the concern expressed in the contemporaneous documents, that in fact the lack of fibre was not and would never have been a separate, free-standing feature which would, of itself, have compromised the ability of the slab to withstand the racking leg load requirement. Thus the new proposed pleading was, in substance, the case previously proposed to be advanced, merely shorn of any complaint regarding fibre content. The factual substratum of the original allegations was cracking of the concrete slabs, damaged edges and localised areas of insufficient thickness, which were said to require patchwork repair at costs of about £380,000. The new claim was of a systemic defect affecting the entirety of the floor slabs, which required the replacement of the whole floor and it was not fair, reasonable, or accurate to characterise that new case as arising out of substantially the same facts as were already in issue. The Court of Appeal held that in the circumstances, it was unnecessary to express any view upon the manner in which the trial judge had exercised his discretion to refuse permission to amend.
Comment What this judgment demonstrates is that the courts will allow quantitative but not qualitative amendments. Whilst A’s counsel submitted that the essential character of A’s complaint was unchanged and it was simply that the number of areas thought to be thin had been found to be greater than first thought, the court held that the amendments were qualitative, not quantitative, or at the very least, a difference in degree which amounted to a difference in kind.
A brief post Mitchell update The Court of Appeal, including Master of the Rolls, Lord Dyson and Lord Justice Jackson last week heard three conjoined cases concerning relief from sanctions. They will attempt to use the cases to clarify the position on the enforcement of the new compliance rules and provide definitive guidance on when to grant relief from sanctions following Mitchell v News Group Newspapers Ltd [2013] EWCA Civ 1537. The three cases are: • Decadent Vapours Ltd v Bevan & Ors – an application for relief where a case was struck out for the late payment of court fees • Denton & Ors v TH White – an appeal against relief from sanctions being granted for a party that served six witness statements late, requiring the adjournment of a hearing • Utilities TDS Ltd v Davies – where the court will decide whether two trivial breaches aggregate so as to become one significant breach Such is the concern about the decisions and their knock on effect that the Law Society and Bar Council have intervened in the cases, on the basis that the respective professions have an interest in the case. They are calling for a clarification of the Mitchell criteria to avoid further satellite litigation and to enable parties to actively work together to bring a case to trial, rather than focus on ‘catching each other out’. We will report further as soon as the judgments are to hand.
“Such is the concern about the decisions and their knock on effect that the Law Society and Bar Council have intervened in the cases...”
Relief from sanctions – late service of witness evidence In the case of Scotbert Gordon v Osra Fraser (No.1) [2014] the
wishes to call, he may serve a witness summary instead. The
court applied a more flexible approach in giving relief from
witness summary must be served within the period in which
sanctions in relation to the late service of witness evidence
the witness statement would have had to be served. CPR
than has been seen in other recent cases. It is possible that
r.32.10 provides that if a witness statement or summary is
the court did so in light of the unusual background to the
not served in respect of an intended witness within the time
case.
specified by the court, the witness may not be called to give
The defendant had otherwise complied with the rules and,
oral evidence without the court’s permission.
although there was no detailed explanation of the reason for
F made an application on the first day of trial to call the
the breach, the court took the view that it was likely that it
branch manager, despite having failed to serve a witness
was inadvertent, not deliberate. The claimant accepted that
statement or witness summary in time.
its case was not prejudiced.
Background
It appears that during the course of the proceedings and prior to service of the witness summary, F’s solicitors successfully applied to come off the court record, so that
The defendant (F) was being sued by the claimant (G), her
F was acting in person, although it does appear she was
93 year-old father, for the alleged improper withdrawal
represented by counsel at the trial.
of money, of which he was the beneficial owner, from a
The judge granted permission and the trial proceeded.
Santander bank account in their joint names. There were
The judge agreed to give full reasons for his decision in his
many individual withdrawals and G’s case was that most
judgment.
of them were withdrawals by F, although some had been made by him as a result of F’s ‘undue influence’. F’s defence was that G had withdrawn the money himself to finance his
The decision
girlfriends and gambling.
The judge held that as the application was made after the
F intended to call the manager of the branch of Santander in question as a witness. After a series of extensions of time, a date for exchange of witness statements was agreed but no statement was served for the branch manager. Almost three months after that date, F served a witness summary containing her evidence, which was that G had attended the bank on his own and made the withdrawals. Although F experienced problems with obtaining a signed statement from the branch manager, she served her other witness statements on time. Under CPR 32.9 where a party cannot obtain a witness statement from a witness whom he
time for service of the statement had expired, it was governed by the principles in Mitchell v News Group Newspapers Ltd [2013] EWCA Civ 1537, [2014] 1 W.L.R. 795 relating to applications for relief from sanctions pursuant to CPR3.9. Notwithstanding that he took the view that the breach was neither trivial nor covered by a good reason, the judge allowed the application, giving three main reasons for doing so: a) That to have tried the case without the only available independent evidence would have given rise to a serious risk of injustice b) That F’s breach had neither prejudiced the claimant nor had any effect on the efficient conduct of the litigation and
c) To have refused the application would have led to an
other cases, the practical effect of refusing permission “in
adjournment which was not needed if he gave permission
furtherance of the objectives of promoting efficient litigation
“...the principles set out in Mitchell, while of general application and to be applied robustly, are not entirely inflexible.” The judge commented that “the principles set out in Mitchell, while of general application and to be applied robustly, are not entirely inflexible.” He formed the view that the Mitchell principles “represent an unforgiving doctrine” where an application for relief from sanctions will, at least usually, be refused, if there is any procedural error other than a trivial one (which is narrowly interpreted) for which there is no good reason. This may be the case even if the default has neither prejudiced the other party nor disrupted the running of the court in such a way as to affect other court users, as was clearly the case here. In the words of the judge “one strike and you are out”. The judge noted that the court still had to give effect to the overriding objective and ensure that its response to default was proportionate and fair. He referred to the cases
and preventing a waste of the court’s resources” may be to cause much greater disruption and waste than would be caused if that permission were to be granted. It was also relevant that the basic aim of a trial was to correctly decide a party’s rights. The exclusion of relevant evidence ran the risk of an incorrect decision being reached. The judge was aware of the evidence of the branch manager from a summary provided during the making of the application and indicated that in the circumstances of this case he would have felt “very uncomfortable in proceeding to try the case after excluding it”. He said that it would have been “difficult if not impossible to be unaffected by the knowledge that the evidence existed, even though it could not now be tested”. To have tried the case without the only available independent evidence would have been very undesirable, and would have given rise to a serious risk of injustice and to the possibility of an incorrect conclusion that F was a thief. The judge referred to the case of Durrant v Chief Constable of Avon and Somerset [2013] EWCA Civ 1624, [2014] 2 All E.R. 757 as being the only case he was aware of in which this particular issue had arisen. In the circumstances he held that it was appropriate to allow F’s application.
of Associated Electrical Industries Ltd v Alstom UK [2014]
Comment
EWHC 430 (Comm) and Chartwell Estate Agents Ltd v
Whether this case represents a turning of the tide remains
Fergies Properties SA [2014] EWCA Civ 506, [2014] C.I.L.L.
to be seen. The judge made the point that while her default
3513 and commented that apart from those cases there
was not trivial, it was “not high on the scale of seriousness”.
was little guidance as yet as to the circumstances in which it
Other judges have, of course, applied the rules to the letter
would be appropriate to depart from the usual rule and, more
and one suspects that the facts of this particular case
particularly, as to the weight to be attached to the prospect
garnered some sympathy for the defendant. The judge
of satellite litigation (apart from the application itself). He
does say in his judgment that the position would have been
made the point that relief from sanctions may be applied in
a little different if counsel had told him no more than that
a wide variety of circumstances and the practical effect of
he wished to call the Santander branch manager, without
refusing it may also vary considerably in different contexts.
explicitly stating what her evidence was. That said, he
He gave the example that in Mitchell the effect was a drastic
would still have had difficulty having excluded the evidence,
curtailment of the costs recoverable by the solicitors but
in trying the case fairly on the remaining evidence.
it would have no other effect on the proceedings but in
Consequential losses can be recovered under the Riot (Damages) Act 1886 The Court of Appeal has overturned a ruling that
losses as a result of the looting and the fire. Their losses
consequential losses could not be recovered from the
included the physical loss of the warehouse and its contents
police following a riot.
and consequential losses including business interruption
In what is considered to be a landmark decision in the case of Mitsui Sumitomo Insurance Co. (Europe) Ltd and 5 Ors v Mayor’s Office for Policing and Crime [2014] EWCA Civ 682, the Court of Appeal held that there was no bar on the recovery of consequential losses, such as loss of profit or rent.
Background
losses, loss of profit and loss of rent. The warehouse and its contents were completely destroyed and the fire is said to have been the largest arson in Europe. Sony was insured not only for damage to the contents of the warehouse but also against business interruption losses in respect of which insurers paid out under the policy. Their claim in this action included £9.8 million paid out for loss of profits, including the costs of mitigation. Cresta Estates Limited (the owners of the warehouse) were insured not only against physical
The appeal arose out of three conjoined claims brought
damage to the warehouse but also against loss of rent. Their
against the Mayor’s Office for Policing and Crime (MOPC)
insurers paid out approximately £1.5 million in respect of
pursuant to the Riot (Damages) Act 1886.
loss of rent. A third disputed claim was made by the owners
The facts of this action are well-known and arise following an incident on 6 August 2011 when Mark Duggan was shot and killed by police, following which thousands of people rioted in London and other English cities. During that period, a gang of youths broke into the Sony distribution warehouse in Enfield, looted it and burned it down with petrol bombs. It was accepted that if the gang were “persons riotously and tumultuously assembled” the MOPC is liable to compensate anyone who sustained loss by reason of the looting or arson (or if their insurers have paid, their insurers, by way of subrogated recovery). At first instance the judge held that the gang were “persons riotously and tumultuously assembled” but the MOPC’s
of stock held in the warehouse, who claimed approximately £3 million for loss of profit, in respect of which they were not insured.
“Liability to compensate under the Act is strict, not fault-based...” The decision The Court of Appeal considered not only the factual background to the incident in August 2011, but also the legal
liability did not extend to consequential losses.
and historical background to the Riot (Damages) Act 1886
MOPC appealed against the finding of liability and the
not fault-based. The test was not whether the police should
insurers (as well as the owners of some of the uninsured stock contained in the warehouse) cross appealed against the decision on the extent of the liability.
(‘the Act’). Liability to compensate under the Act is strict, have been alert to, or should notionally have prevented the damage, nor was it whether the group’s behaviour was such that it should have been obvious to the police that
The owner of the warehouse, its occupier (Sony) and three
something needed to be done. The Court of Appeal took the
companies which had stored goods there all sustained
view that the focus of the inquiry was whether property had
been damaged or destroyed as a result of mob violence.
The Court of Appeal did say that it is surprising that
Whether an assembly is “riotous and tumultuous” is a
the community should be under a strict liability to pay
question of degree and it was for the trial judge to carry out
compensation for the consequences of riotous and
an evaluative exercise to decide that question in light of the
tumultuous behaviour at all, when the police are not liable
primary facts found.
in tort for such consequences even when they have been
The Court of Appeal found that the judge’s findings of primary fact (borne out by the CCTV evidence) amply justified his conclusions that this was mob violence. The judge at first instance carried out an evaluative exercise on the basis of the primary facts that he found and directed himself correctly in law. The result of his evaluation was one to which the Court of Appeal held he was entitled to come and was the sort of evaluation an appeal court should be very reluctant to overturn. On that basis the appeal on the question of liability was dismissed. The Court of Appeal then went on to consider whether Section 2(1) provided a right to compensation that included consequential losses. The Court of Appeal concluded that Section 2(1) provides a right to compensation “for all heads of loss proximately caused by physical cause to property for which the trespasser is liable at common law, save to the extent that they are excluded or varied by the statute.” In principle, Section 2(1) covers all heads of loss compensable under English law for damage to property caused by trespassers in the course of a riot and the heads of compensation recoverable are to be determined with reference to the English law of damages as it develops over time. There was nothing within the wording of Section 2(1) to suggest that consequential losses caused by damage to, or destruction of property should not be included.
Comment This is the first time that a court has ruled that compensation payable under the Act is not limited to physical damage. The police remain entitled to fix an amount of compensation taking into account the behaviour and precautions taken by the affected business, which may have a “knock-on effect” to the extent that the police may seek to dispute more claims.
seriously at fault but because this has been the law since 1714, only parliament can change it. Whether there will now be calls for parliament to do so remains to be seen but they are unlikely to be calls made by the insurance industry!
Landowner’s duty where her tree fell onto railway line In the recent case of Stagecoach South Western Trains Ltd
In January 2006 H engaged TS to carry out some further
v (1) Kathleen Hind (2) Andrew Steel [2014] EWHC1891
work. This work included cleaning out of the crown of the
(TCC) the court held that the duty of a landowner in respect
ash tree and the removal of dead wood. H said that she did
of a tree on her land which fell on to a railway line did not
not ask TS to inspect the tree and that she had asked him to
extend further than the carrying out of periodic and formal
clear out the crown and remove the dead wood, principally
or preliminary observations or inspections, in the absence
twigs, in order to allow more light in. H said that she sought
of any trigger or warning sign.
TS’s advice only to the extent that he would advise on, for example, how much of the branches should be cut out. TS
Background The claimant train operator (S) claimed the cost of repairing damage to a train, as well as other consequential costs, as a result of an ash tree owned by the first defendant (H) , which
did not suggest what needed to be done and H did not seek his advice generally about the tree. In June and September 2007, TS undertook further work in the garden but it does not appear any work was undertaken
fell onto a railway line. The second defendant (TS) was a
to the ash tree.
tree surgeon.
On the night of 17/18 December 2009, the eastern stem of
H’s garden backed on to the railway line in Staines. On 18
the ash tree fell onto the railway tracks. Thankfully, the train
December 2009 one of S’s trains collided with the stem of
that collided with the branch was empty.
an ash tree, which had fallen onto the railway line from H’s
During the course of the evidence given at the trial it became
garden.
clear that TS had carried out some work on the western
The claim against TS related to work carried out to trees and
stem some three years previously and that he had climbed
shrubs in H’s garden in 2006 and 2007. The tree was about 150 years-old and was originally made up of three separate stems. One stem (described as ”the northern stem”) had fallen away many years before H purchased the property. The two remaining stems grew out of a common trunk. They were largely vertical, although it became apparent during the trial that there was a large branch growing off the eastern stem approximately along
on to the western stem for the purpose of clearing dead wood. It appears that the eastern stem fell because the union between the stems was what was known as “an included bark union” and also as a result of decay that had spread from the wound left by the fallen northern stem some years earlier. The bark of the two stems push against one another and year-on-year growth does not provide increasing
the boundary line.
stability; it causes continuing force between the stems and,
Shortly after H bought the property she employed a tree
itself.
surgeon, Mr Holmes, to cut back trees and shrubs to let some light into the garden. She was not happy with his work and did not use him again. She felt he had caused unnecessary damage to the trees. It is not clear if he did any work to the ash tree in question and if so, what he did.
as occurred here, causes a crack to develop in the union
It is not suggested that anyone saw a crack prior to the collapse but there was debate as to whether or not it should have been seen.
S argued that H owed a duty to have the tree regularly
In this instance, the judge was of the view that H was more
inspected by an arboriculturalist. Had that happened, the
than capable of carrying out a meaningful preliminary/
arboriculturalist would have been obliged to carry out a
informal inspection of her trees. She plainly knew a
detailed inspection of the base of the tree and would have
reasonable amount about trees, bearing in mind she was a
discovered the crack and decay.
“regular and enthusiastic� gardener. The evidence given by
The judge formed the view that the issues regarding the potential liability of H were as follows: 1. Is an ordinary landowner obliged as a matter of course
H was that she carried out regular informal inspections and that the tree was apparently healthy. The judge accepted that the included bark union would not have alerted an ordinary landowner to any problems and was, in any event,
to instruct an expert arboriculturalist to carry out regular
covered in ivy, as was the wound. A reasonable and prudent
inspections of the trees on his or her land?
landowner was not obliged to inspect the trunk of an
2. If not, is the landowner obliged to carry out preliminary/ informal inspections? 3. Did H have sufficient knowledge and experience to carry out proper preliminary/informal inspections? 4. Did she carry out proper preliminary/informal inspections?
apparently healthy tree which was difficult to access and was covered in ivy. On that basis there was nothing that should have alerted H or put her on notice that the tree was anything other than healthy or required her to instruct an arboriculturalist to undertake a closer inspection. On that basis the claim against H failed. TS was a tree surgeon and not an arboriculturalist. Whilst
The decision The judge held that a reasonable and prudent landowner was not obliged, as a matter of course and without any trigger or warning sign, to pay for an arboriculturalist to carry out periodic inspections of the trees on his land. This follows the decision in Micklewhite v Surrey County Council [2011] EWCA Civ 22. Closer inspection by an expert was required only when something was revealed by the informal or preliminary inspection that gave rise to cause for concern.
he might have expressed an opinion as to how the work was carried out, H told him what work she wanted to be carried out. He had not been asked to inspect the tree and his contractual obligations did not require him to do so. His duties were circumscribed by his contractual obligations as per the case of Henderson v Merrett Syndicates Ltd (1) [1995] 2 AC 145. For a duty of care to arise there had to be sufficient proximity between S and TS. Although TS owed a duty of care in relation to the manner in which the works were carried out, there was no suggestion that he carried out those works in
The judge commented that an ordinary landowner, required
anyway deficiently so as to be in breach of duty. The court
to act reasonably and prudently, was obliged to carry out
held that there was an insufficient degree of proximity to
regular preliminary/informal inspections of the trees on
give rise to a wider duty of care. TS was not involved in
his or her land, particularly where those trees may border
an activity which gave him a measure of control over, and
a highway, a railway or the property of another. The judge
responsibility for, the safety of S’s trains.
suggested that there may be circumstances in which it might be appropriate for an arboriculturalist to be instructed, such as where the landowner may be absent for long periods of time or is physically unable to undertake such a task. Although he considered it less likely, it could also be that the landowner was so completely ignorant of trees that they would be unable to carry out a meaningful inspection.
So far as the duty to warn was concerned, it was accepted that in certain circumstances a professional man and/or a contractor can owe a duty to their employer to warn them of inherent defects in the work, even if those defects or that work were not in their direct responsibility. The court did not accept that such a duty arose on the facts of this case. On that basis the claim against TS also failed.
Comment It is notable in this case that the judge was critical of the
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claimant’s expert’s evidence. The judge indicated that
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agreement about the state of the tree before the incident and, in respect of the case against TS, a discussion of a various professional obligations which he may or may not
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have had. Although there was a useful joint statement, the
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enthusiastic gardener who clearly knew a reasonable
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respect of various aspects of trees to teach children. That may have swayed his judgment in forming the view that she had carried out a meaningful inspection of her trees.
Contact Us For more information on any articles and cases featured in other editions of Legal Watch: Property Risks & Coverage newsletters please contact: Marise Gellert, Partner T: 0207 469 6249 E: msg@greenwoods-solicitors.com
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