HMV – Heist My Vouchers

Community Trade Mark E8741522

My son, like many over Christmas, was given an HMV gift card. He was looking forward to going down to HMV Gunwharf Quays on Saturday to cash it in. So when he heard that HMV were no longer honouring gift cards, he asked me how was this legal. After all, if your dad’s a lawyer, you expect him to know these things.

It’s an interesting question. The answer is a moral one, rather than a question of illegality. It is not unlawful to breach a contract.

In reality what HMV has done is breach its consumer contracts with gift card holders. By refusing my son’s gift card HMV will be breaching its contract with my son, the assignee of the gift card agreement formed when the buyer of the card bought it. Any argument by HMV that it has the contractual right to refuse to accept the card will not stand up. The card itself refers to other terms and conditions – these usually are not presented or explained to a consumer buying a gift card at the time of purchase, so cannot be considered to have been properly incorporated into the consumer contract (see, for example, the classic Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163). A purchaser of a gift card online may have had to click through the relevant terms and conditions, so it is possible that HMV could claim online consumers are bound by the terms and conditions – it’s impossible to check right now, as the administrators have suspended any sales activity on the hmv.com website.

The question of incorporation is in any event irrelevant. Any term giving HMV the ability to avoid honouring a gift card would be unfair and unenforceable under the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCRs). In particular, thanks to Google’s web cache, it is possible to read the HMV gift card terms and conditions. These include:

9. HMV reserves the right to add to or waive these terms and conditions on reasonable notice for legal, security or regulatory reasons or to discontinue the gift card scheme at any time in the event of circumstances beyond its reasonable control. Customers will be notified in advance via in-store displays and the HMV website in the event of any such change.

HMV cannot, surely, consider that this gives it the right to suspend gift cards indefinitely, particularly upon any argument that going into administration was ‘beyond its reasonable control’? This must be an unfair term under reg 5(1) of the UTCCRs? In addition, any claim by HMV that it has a right to refuse gift cards must also fall within the scope of the Unfair Contract Terms Act 1977. Section 3(2)(b) may not make use of HMV’s clause 9 possible, if a court agrees that the term used in this manner is unreasonable.

So why can’t my son nip off to Portsmouth County Court and file a small claim against HMV? The answer is that whilst HMV is in administration, no-one can commence proceedings against it without the leave of the administrators or the court (see paragraph 43(6) of Schedule B1 of the Insolvency Act 1986). It is unlikely that anyone at Deloitte will give my son the time of day, yet alone permission to bring a claim against HMV. Clearly the administrators will not be in a hurry to permit consumers to enforce their rights – it is suggested that there may be up to £100m value of gift cards in circulation.

So surely HMV must be guilty of some criminal offence, given that they must have known they were at risk of going into administration after the Christmas period, in continuing to sell gift cards that they knew consumers would be unable to use? Perhaps. It will come down to an assessment of intention and timing. No doubt HMV’s directors will claim that right up until Monday this week, they honestly thought they could keep HMV on the road, so HMV’s continued sale of gift cards over the Christmas period – the peak time for the sale of gift cards – was legitimate. Instructions to stop the sale of gift cards were reportedly issued as soon as the decision was made on Monday to put the company in administration. Others may think, “Bollocks. You knew.” Suspicions would be particularly aroused if the HMV administration is under paragraph 22 of Schedule B1 of the Insolvency Act 1986, as entering into administration by this route requires the directors to make a statutory declaration as to the solvency of the company and to give prior notice in certain cases. This at least implies some knowledge of the state of the company prior to the date the administration started (and sale of gift cards was suspended). If that was the case, then it is possible that the directors could be required to answer to fraud charges (fraud by false representation – sections 1 and 2 of the Fraud Act 2006).

If the administrators succeed, then the gift cards may eventually be honoured. Alternatively, the administrators may sell what they can of the business of HMV as a going concern and liquidate the rest, in accordance with their duties in the Insolvency Act 1986, distributing the proceeds to the company’s creditors. Sadly, trade creditors including gift card holders will be unsecured creditors, who come bottom of the pile. Any available assets are first distributed to the secured creditors (those with a charge over some of the company’s assets) and preferential creditors (defined in Schedule 6 of the Insolvency Act 1986 – mainly related to employees’ remuneration and pensions). Only when these are paid and the administrators costs have been met, will the remaining assets, if any, be realised and shared out amongst the unsecured creditors. In most cases, there is nothing left by the time it gets to the unsecured creditors, who end up with nothing.

Whatever the outcome, I know I’ll be out of pocket. Like many parents – or the Bank of Mum and Dad, as we are sometimes known – I’ll be “honouring” the value of the gift card and giving my son the cash when we are in HMV.

Clinical Commissioning Groups’ Sale of Patient Data

Arguably the most significant reform of the Health and Social Care Act 2012  is the introduction of a National Health Service Commissioning Board, which will supervise local primary care clinical commissioning groups. These clinical commissioning groups will replace primary healthcare trusts. Primary healthcare providers, particularly GPs, were always the gatekeepers to the National Health Service, but under the 2012 reforms, they will also be the principal budget holders under these clinical commissioning groups, buying secondary care in a quasi-competitive open market.

Under ss14X and 14Y of the National Health Service Act 2006, following wholesale amendment to that 2006 Act by the Health and Social Care Act 2012, clinical commissioning groups will have separate statutory duties to promote innovation and research. The groups also have a duty to carry out their functions effectively, efficiently and economically (s14Q).

To assist clinical commissioning groups in their extensive duties set out in Part 2 of the 2006 Act, they will have the power to raise income (a new power under s14Z5 of the 2006 Act), by doing anything the Secretary of State can do under ss7(2)(a), (b) and (e) to (h) of the Health and Medicines Act 1998, either alone or with other groups. In particular, s7(2)(f) will permit the groups “to develop and exploit ideas and exploit intellectual property.”

Whilst it may therefore be a stretch to argue that clinical commissioning groups have a duty to exploit the value there may be in patient data, it is clear that to exploit patient data is well within their duties and powers under the 2006 Act. In addition, disclosure of information “made for the purpose of facilitating the exercise of any of the clinical commissioning group’s functions” is explicitly permitted by the 2006 Act (s14Z23(1)(f)).

This only leaves the Data Protection Act 1998 to consider. Could clinical commissioning groups sell patient data under the Data Protection Act 1998, with or without the consent of patients themselves?

This is an interesting question. One answer is that it would be possible. In order to process patient data, the groups would have to meet one of the conditions for processing sensitive personal data (as defined in the Data Protection Act 1998).

It is arguable that there is the statutory basis for selling the data, being to comply with commissioning groups’ statutory duties to promote innovation and research, and to raise income in order to exercise their statutory duties effectively, efficiently and economically. As there is a statutory basis, the selling of patient date could be argued to be “necessary for the exercise of functions conferred by or under statute” – which is one of the conditions for which the processing of sensitive personal data is permitted under the Data Protection Act 1998 (paragraph 7(1)(b) of Schedule 3 of the Data Protection Act 1998). This does not require patients’ consent.

In addition, processing for research purposes is itself a permitted purpose under the Data Protection Act 1998 (paragraph 10 of Schedule 3 of the Data Protection Act 1998, and paragraph 9 of the Schedule to the Data Protection (Processing of Sensitive Personal Data) Order 2000, SI 2000/417); again without patient consent.

Lastly, there is always the ‘medical purposes’ condition of paragraph 8 of Schedule 3 to the Data Protection Act 1998:

8 (1) The processing is necessary for medical purposes and is undertaken by—

(a) a health professional, or

(b) a person who in the circumstances owes a duty of confidentiality which is equivalent to that which would arise if that person were a health professional.

(2) In this paragraph “medical purposes” includes the purposes of preventative medicine, medical diagnosis, medical research, the provision of care and treatment and the management of healthcare services.

Patients’ consent may not strictly be required by law, but under the first (and second) data protection principle, patients will have to be made aware by clinical commissioning groups that their data, in whatever form, for medical research purposes. Patients could try to exercise a stop notice right under s10 of the Data Protection Act 1998, but ‘good luck with that’ is the phrase that immediately springs to mind.

Although it may be lawful for commissioning groups to sell patient data, it may be that best practice will lead to any sale being restricted to Barnardised or anonymised patient data. This may be clarified by the NHS Commissioning Board, which has a responsibility to issue guidance on the processing of patient information under s13S of the 2006 Act, following the abolition of the National Information Governance Board for Health and Social Care in the 2012 Act. ‘Patient information’ in this context is a new term defined at s20A of the Health and Social Care Act 2008, and is broader than a patient’s personal data, as defined under the Data Protection Act 1998, to include any information about a person’s health, diagnosis or care or data derived from that information, whether that information or data identifies an individual or not.

So, a case can be made for saying that commercialisation of patient data may well be a consequence of the Health and Social Care Act 2012. Whether this consequence was unintended or was anticipated is for others to answer.